In his 13 years at the helm of Cross Atlantic Capital Partners Donald Caldwell has fended off Y2k, multiple recessions and, lately, he’s taken on Facebook.
The early stage technology investment firm has wins like GAIN Capital, which brought a 20 to 1 return when it went public earlier this year, to its name.
Part of the long-reaching family tree of ex-Safeguard Scientifics employees, Caldwell founded the firm in 1999 to invest in deals in the United States and Ireland with offices in Radnor and Dublin. However, with its next fund, Cross Atlantic is having a change of heart.
“Increasingly our focus has been on America, the Irish economy has fallen upon such hard times,” said Caldwell.
In addition to pivoting the fund, Caldwell and the firm are locked in a legal battle with Facebook over a patent they hold for a “System for Creating a Community for Users with Common Interests to Interact In.”
After Cross Atlantic’s recent investment in the Bay Area’s Rootstock Software, we sat down with Caldwell to discuss his investment philosophy, battling two recessions and getting “Amazoned.”
What kind of companies do you typically invest it?
The focus is early-stage technology. We define “early-stage” as some revenue, enough to prove that company can deliver. One of our most successful companies was Kanbay, which was one of the first companies to perfect multi-shore development, which everybody does now.
Cross Atlantic has been around since 1999, so you’ve seen a few boom and busts. What has been the difference in the 12 years since you started?
In the 90s, the economy was booming and so was the technology. We were racing the Y2K problem then. Developer services, IT consulting services and anything related was just off the charts. We survived the cycle but when we got to 2001. Back then everyone was worried about being “Amazoned.”
Now we have been distinguished by an incredible recession. A couple of bright days along the way but it has been an entirely different decade.
And you mentioned the Irish economy didn’t help either.
They were one of the biggest victims of the crash. That’s why our new fund with be U.S.-led and not “Cross Atlantic.”
Your firm deals in lots of different cities. What makes Philadelphia unique compared to the other markets you’re in?
It’s always easier to invest in your own backyard. It’s easier to know the people and check them out if you don’t. It’s also easier to stay on top of a company. Some of our biggest success have actually been in Chicago. What’s in common with our two areas is that there is not as much venture capital, so there’s not as much competition for a venture capital firm.
We noticed you have a pending lawsuit with Facebook. Is that still going on?
Yes. We don’t consider ourselves in the litigation business but if you have an asset you have to make use of it. We think we own a valuable patent and it’s not being recognized and we have to do our best to defend it. It has a court date for the end of the year.
What’s the ideal outcome?
They recognize the validity of our patent and we’re compensated for the use of the patent.
What exactly is the patent?
Basically, the creation of online communities and communication within that community.
Wow. It sounds like, on that ground, you could go after lots of folks. A MySpace a LinkedIn… why Facebook?
Facebook is the largest and it’s just obvious that they ignored our patent. So why not choose them?
Knowledge is power!
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