Pennsylvania’s state-backed early-stage capital provider for tech startups says it’s hurting.
Since 2008, Ben Franklin Technology Partners (BFTP) has lost around half of its previous state funding due to budget cuts, from $28 million to $14.5 million per year. That breaks down to about $3.5 million for each of its four centers across the state, including Ben Franklin Technology Partners of Southeastern Pennsylvania in the Navy Yard.
During that time, the 35-year-old nonprofit has been able to supplement its budget from the likes of the state’s Alternative Energy Development Program initiative, from 2010 to 2013, and the Innovate in PA initiative, from 2016 to 2018, according to comms VP Jason Bannon.
(Not all of BFTP’s funding has historically come from the state; some is federal, some is private, Bannon said, and a spokesperson for the state’s Department of Community & Economic Development emphasized that the $14.5 million figure has been in place for the entirety of Gov. Tom Wolf’s tenure — in other words, Wolf didn’t make the cuts.)
However, in 2017, the organization got word that these supplemental state funds would not continue. This past year has been its first feeling the true effects of halved funding, according to the southeastern BFTP center’s CEO, RoseAnn Rosenthal.
When Wolf dropped the anticipated budget for 2019-2020, BFTP realized it was being asked to continue working at $14.5 million — the first year of a true 50% cut, with nothing available to restore its funds to pre-2008 levels unless the state reevaluates.
Fighting the countdown to the fiscal year starting on July 1, the nonprofit has been petitioning for restoration of its previous $28 million, to be used equally among the four centers. In March, Chief Investment Officer Scott Nissenbaum testified live before the Senate’s Appropriations Committee about how the funding is used in an attempt to prove the organization’s worth; Rosenthal also submitted written testimony.
See some of Nissenbaum’s testimony toward the end of this clip:
Rosenthal said BFTP’s support is often local startups’ first source of funding due to the rarity of early-stage funders. If it must continue with the $14.5 million, it will have to invest in fewer startups instead of providing less capital.
“We have to be with these companies for quite some time until they get their traction and begin to attract in serious private capital,” Rosenthal said. “So, we can’t bring them halfway down the dock and leave them stranded.”
This means BFTP will focus mainly on its existing companies and will be unable to add much to their portfolio. Since its founding, the Southeastern Pennsylvania outpost has invested in over 2,000 local startups, and it’s actively invested in 230 local companies. In 2017, that meant about $12 million for 67 companies looking to plant roots in the region, and $8.1 million for 51 companies in 2018.
Rosenthal said BFTP believes its work is critical in creating an “entrepreneurial and innovative” economic ecosystem in the state. A report from the Pennsylvania Economy League and KLIOS Consulting found that BFTP raised the state’s gross product by $4.1 billion between 2012 and 2016. The same report found that the company returns $3.90 dollars to the state for every $1 invested.
“[The state] has to invest in its future,” said the CEO, “and investing in its future, in part, means investing in companies that are going to grow Pennsylvania’s economy.”
Rosenthal said the budget cuts will not affect the $50 million, blockchain-supported GO Philly Fund, launched in February.
In the meantime, Rosenthal said the company is continuing with the petition and is grateful for the local support.
“We have been really overwhelmed by the amount of response from our constituents here in the region and just wonderful things that they’re saying,” she said. “It gives us the energy and the motivation to keep going.”-30-