Why this LA venture firm is looking to Philly for deals

Scottie Wardell is paying attention to Philly.
After a big win in Philly, Wardell, a director with Los Angeles-based venture capital firm Kayne Partners, is excited about the prospect of several more investments with Philly companies. That big win was with ColdLight, in which Kayne invested in 2013. The Wayne big data company sold to PTC for $105 million in May. Wardell worked on the deal during the acquisition.
Philadelphia is one of a handful of markets that Kayne Partners visits a few times a year to source deals. Wardell was just in the city last month, where she met with four companies that Kayne is considering investing in (she could not disclose them). It’s similar to how Philly’s Osage Partners is looking for deals in Washington, D.C.
Other markets high on their priority list include Seattle, Boston and Austin. Each staffer at the firm has a region and industry they focused on. Wardell’s is Philly, and so is Kayne senior associate Robert Shilton’s. (They haven’t actually made any investments in Los Angeles yet but they’re not against it — they just haven’t found any LA companies to invest in yet.)

They’re not interested in mainstream tech scenes like San Francisco and New York City, Wardell said.
They’re more looking at cities that have a strong talent pool thanks to universities, have a high quality of life and where startups can be capital efficient. Philly hits all those marks, said Wardell, who grew up the region. She went to Episcopal Academy in Newtown Square and her mother is Liz Dow, the CEO of LEADERSHIP Philadelphia. (We noted her as a tech leader who should run for mayor back in 2013.)
When it comes to tech companies, Kayne generally invests between $5 million and $25 million in companies that are doing $5 million to $50 million in revenue. They’re focused mostly on B2B software companies, of which Philly has many, and are industry agnostic. They’re currently investing out of a $208 million fund that they closed in December 2014.
The common refrain around Philadelphia with startups that leave the city is that their investors wanted them close by. Kayne’s not interested in that. One way to explain that is that the firm only makes non-control investments, meaning that it’s never taking control of the business. But the firm is also happy to take more of a backseat role if that’s what the startup wants. They’re also happy to come to Philadelphia.
Bottom line, Wardell said, is that if a company is thriving in Philadelphia, Kayne wants them to stay.
“We’ll come to them,” she said.
This is in line with what we’ve seen from Philly tech startups that have raised Series A and B rounds — startups like Curalate, Zonoff and RJMetrics have all found funding outside of Philadelphia.
It raises the question: Does the Philly tech scene really need a strong venture capital community to thrive?
She also said that Philly’s profile seems to be rising among venture capitalists around the country — whenever she’s working with a Philly company on a potential investment, Kayne is never the only venture firm that they’re talking to.