Q&As / Venture capital

Friday Q&A: Kevin Kemmerer of Safeguard Scientifics

A conversation on the current impact of a landmark venture capital firm.

Updated: Corrected numbers, general edits.

Of the many investment firms in Philadelphia, there is no one quite like Safeguard Scientifics.
In Internet years the company is ancient. Founded in 1953,  one of its early investments was Jerrold Electronics, a company that eventually saw its cable operations bought out by Ralph Roberts to become a little company named “Comcast.” Since then, the company has been a staple of the local investment community surviving the Web 1.0 days to emerge stronger than ever. Since 2006, Safeguard has invested $175 million.
While most firms receive money from private individuals with tight strings attached,  Safeguard is one of the small handful of firms to be publicly traded. Being publicly traded allows the company to be much more patient with its 17 partner companies, avoiding situations like the recent Zappos deal where the company’s investors forced it to sell to Amazon.
But Safeguard is most proud of what it calls its “operating platform”: a series of legal, administrative and operational services to help its investments quickly grow revenue.
We chatted with Kevin Kemmerer, EVP and managing director of Safeguard’s technology group about investing locally, the company’s much-respected “operating platform” and what entrepreneurs can do to get Safeguard’s attention.

What’s your role at Safeguard?
We hold 17 businesses. Ten of them are life sciences, seven are technology. I’m responsible for the existing technology portfolio and I’m also responsible for looking for new opportunities.
How do you find new companies?
We pursue three specific markets: healthcare IT, financial technology and Internet/new media. That last one tends to be a blend of ad based technology, next generation e-commerce etc.
If I were a company in those areas what would I do to get your attention?
We look to provide capital to entrepreneurs who have already gotten businesses off the ground and are looking to grow the business rapidly. What we bring to the table you don’t typically see from another source of capital. We tend to provide operating services that focus on scaling businesses. That’s everything from help on the PR side to our legal folks helping to our operations folks.
We look for companies that have some momentum and we see a great synergy between their needs and how we can help, not just with our capital, but with our operating platform.

“Mobile is more than just a category. It’s not an afterthought or a separate category, it is the market.”-Kevin Kemmerer

So you guys are never the first money in?
We tend to be the first institutional investment. Though you’re seeing these seed stage investors around $500,000 to $1 million that are bigger than your traditional angel round, but smaller than your typical investment round that you would see in Silicon Valley or Boston.
But when you think about how to get a company from a couple million to $100 million in revenue, that’s when you start requiring capital to build infrastructure to build your business quickly. Those are the things that we are uniquely tuned to help build.
How does public money make Safeguard more flexible? I know in a lot of cases going public makes you less flexible and more beholden to quarterly earnings and shareholder demands.
Earnings is not the core focus of how people look at us. People are not looking for regular earnings, they are looking for big wins in our portfolio. If I’m a typical VC, I have a certain timeframe to deploy and return the capital I have. Whereas we have more flexibility, we might use the money for a slightly different purpose that the strict sets of criteria that other firms do.
How have you seen the technology community change in your six years with Safeguard?
Since I have been here we have seen a shift in priorities in the technology community. When I joined the firm, the community was transitioning from enterprise software to enterprise SaaS (software as a service).
Healthcare IT has emerged as a bigger category here in Philadelphia. The second thing is the movement of growth to consumer-focused internet companies. If you look at the business plans you see in Philadelphia, there’s a lot of healthcare IT, theres a moderate amount of financial technology – though we see more of that in New York – and we see an awful lot of B2C consumer web companies. That didn’t exist four or five years ago.
Any predictions for the city going forward?
I think the biggest thing is mobile as more than just a category. It’s not an afterthought or a separate category, it is the market. It’s effectively ubiquitous.

Companies: Safeguard Scientifics

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