Philly investors ‘grow with their companies’: Saul Richter

After spending more than four years as an investor at New York City-based Himalaya Capital, Saul Richter left for Philadelphia to start the Navy Yard-based Emerald Stage2 Ventures.

One reason he left New York?

Investors in Philadelphia are in it for the long haul.

“Lots of capital flows through New York City in hyped-up cycles,” he said. “Then it moves on.”

In Philadelphia, there’s a community of investors that understands that it takes awhile to produce a successful exit, he said. They know they have to grow with their companies, he said, and that’s one of the region’s “competitive advantages.” There’s also not as much capital in the region, making it a “buyers’ market.”

Richter, 43, who lives in Center City, has spent the last two decades of his life either managing funds or working at startups. At Emerald Stage2 Ventures, in which Benjamin Franklin Technology Partners and the University City Science Center are investors, he focuses primarily on B2B, healthcare IT startups that have just passed the seed stage.

He passes on consumer startups because they’re not “capital efficient,” he said at the Science Center’s monthly Coffee & Capital investor chat. That means, Richter thinks that putting $1 into a consumer startup will more often deliver less of a return than his focus.

He manages what he called a small fund — about $15 million — and makes about two investments a year, usually amounting to $2 to $3 million. Since its founding, Emerald Stage2 has invested in eleven companies, 60 to 70 percent of which are in the Philadelphia region, he said.

One of Emerald Stage2’s goals is to keep tech jobs in the region, Richter said. He started the fund to support state-backed Benjamin Franklin Technology Partners’ investments and help keep their portfolio companies — and their jobs — in the area.

When there isn’t a venture capital firm to invest in BFTP’s startups after they’ve received seed funding, that’s when out of market investors come in and take tech companies with them, he said.

The firm has largely succeeded, Richter said. All 11 of its portfolio companies have stayed in the region. Eight are still active. Among his exits are Lucinda Duncalfe‘s Conshohocken paid search company ClickEquations, which sold to Channel Intelligence in 2011 for an undisclosed sum, and Wilmington, Del.-based financial firm Maverick Network Solutions, which sold to FiServ in 2011 for less than $8 million, according to the Inquirer (the Inquirer reported that investors only received “partial repayment” in the sale).