MentorTech Ventures was rejected by the federal government’s Small Business Administration (SBA) venture capital program because it had “too few realizations,” or returns, according to MentorTech leadership and as reported by the Wall Street Journal (behind paywall).
The decision suggests that the federal government is playing it safe because of the way a similar program failed after the dot-com bubble, one attorney told the Wall Street Journal.
MentorTech, a University City-based venture capital firm that invests in startups with ties to Penn, applied to the SBA’s program, which invests $20 to $50 million in early stage venture firms, in hopes of using that capital for its fourth fund, said managing partner Brett Topche. MentorTech will likely begin raising its fourth fund in 2014, Topche said.
Part of President Obama’s Start Up America Initiative, the program is meant to inject early-stage funding into parts of the country where venture firms don’t normally do many deals.
Managing partner Michael Aronson called the SBA’s decision “very disappointing,” saying in an email to Technical.ly Philly that it ignored MentorTech’s “track record of economic development in Philadelphia.” MentorTech has invested in Philly startups like Curalate, Neat Company, SnipSnap and Ticketleap.
MentorTech’s four exits include Diapers.com, which Amazon bought for $545 million in November 2010, and PayQuik, Inc., bought by Citigroup, and which generated a 3.8-times return on a $1 million investment, as reported by the Wall Street Journal.
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