Career development / Investing

Friday Q&A: Peter Boni, CEO of Safeguard Scientifics and “Master Entrepreneur of the Year”

The company's stock is at a seven-year high, its CEO was honored as an Ernst and Young "Master Entrepreneur of the Year" and the firm has seen the windfall of four exits in six months.

Peter J. Boni, president and chief executive officer at Safeguard Scientifics (Image Courtesy of Safeguard Scientifics)

To say that Safeguard Scientifics is having a good year is an understatement. The company’s stock is at a seven-year high, its CEO was honored as an Ernst and Young “Master Entrepreneur of the Year” and the firm has seen the windfall of four exits in six months.
The Wayne-based venture capital firm invests in life sciences and technology companies but operates differently than a typical firm. First, Safeguard is a publicly traded company. Secondly, the firm refers to its portfolio companies as “partner companies” and invests a great deal of time and resources in mentoring and incubating its investments.
“This is not some case study we wrote in business schools,” says Safeguard CEO Peter Boni. “We have the scars of experience and can give good advice.”
We chatted with Boni shortly before he left for vacation to his house in Cape Cod about his firm’s recent success, whether Safeguard would ever move to Philly from the ‘burbs and if he’s afraid of another bubble.

The stock is up. You just received the award for “Entrepreneur of the Year” and you guys have had four exits in the past six months. Is there a particular reason you can attribute for all the recent activity?
We’ve been building businesses with the anticipation of exiting in a three-to-five year time frame. And we’ve been on this strategy since 2006. When you map this on the calendar, it says that it’s now time to see some exits. Number two: the climate is much more healthy in terms of strategic buyers willing to invest with their war chest of cash that they’ve been accumulating since the downturn. Number three: it speaks to the success in our ability to build businesses.
What’s the criteria for a Safeguard investment?
We’re multiple stages and in two industries for a variety of reasons. Technology and life sciences tend to be counter-cyclical. Why be unbalanced in any one way? There are various studies that say that the more singular a fund’s focus, the less consistent its return.
Is this a product of you guys being a public company?
It’s influenced by our experience more than anything. Those that have a constant returns in the “alternative asset management” industry have a better chance of raising more funds. So even if we were private we would still be subject to fundraising. It just happens that our shareholders benefit and not our limited partners.
Safeguard now has a one to five debt ratio. What does that empower you to do? We imagine that with more cash on hand you can be a bit more adventurous.
It really hasn’t altered our deployment philosophy. We still look to make three to five times cash on our investment. Shoring up the balance sheet was to benefit our shareholders. We were dealing with the credit crunch. Normally, companies often maintain a one to one debt to equity ratio. But that one to one ratio was persona non grata in the aftermath of the credit crunch and the fear of liquidity that came with that. So our buying back of debt at a substantial discount had an enormous advantage.
In the dotcom boom, Safeguard posted a nine-digit loss. Some people think we’re heading for another bubble burst, though maybe not quite as large. Is that something that’s affecting your mindset moving forward?
Yes and no. Zynga, Facebook and LinekdIn mania are impacting the social network and gaming valuations. The difference between now and dotcom bubble is that many of the businesses actually have a business model that creates value and offers profitability. These valuations are stiff in some cases, but one can see how a company would grow into that valuation.
There’s no “we’ll figure out the business model later.”
Basically, yes.
We often ask this of companies in the burbs. What would it take for Safeguard to move into city limits?
I don’t even want to respond to that. That will get us into a political philosophy and I don’t want to go there.

Companies: Safeguard Scientifics

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