Philly’s Most Powerful Investors Offer Strong Views on Startup Scene

November 04, 2015

The opening panel discussion of the IMPACT 2015 Capital Conference featured five heavy hitters in the local venture capital community — and they weren’t shy about pointing out the positives and negatives of the current startup landscape.

“This is the most vibrancy I’ve seen in this community in the last 15 years,” said Stephen Zarrilli, president and CEO of Safeguard Scientifics, which provides growth capital for healthcare and technology companies. “The last time was in the mid- to late-90s during tech bubble buildup.” Since then we “lost our mojo” because many local entrepreneurs and investors believed the city couldn’t compete with the resources and talent in other parts of country. Now that’s changing in a big way, he said.

David Bookspan, founding partner of early-stage investor DreamIt Ventures, said Philly has a "sweet spot" in health care information technology because small companies can pilot products and services with health care giants like Penn Medicine and Independence Blue Cross.

"Capital is absolutely critical to the growth and health of early-stage companies," said Bookspan. "But more important is early, marquee customers. Working with major payers and providers is a big strength that attracts them to DreamIt."

Bookspan also made some news during the discussion — disclosing that DreamIt's investment fund amounts to $23 million and saying that he hopes to launch 100 DreamIt Health companies per year. This year, the organization launched just 20. "It's going to take a lot of work, but we see the opportunity for Philadelphia to be a super-hub for health care innovation.", lead reporter for Technically Philly?

It's no secret that Philadelphia is stuck in a "city vs. suburbs mentality." The city folks look down on suburban startups for launching companies in boring places. The suburban folks think it's nice to have a free parking spot everyday and not deal with a hectic downtown. So how do we bridge that gap, asked panel moderator Juliana Reyes, lead reporter forTechnically Philly?

Michael DiPiano, managing general partner of venture firm NewSpring Capital, said we need to realize that "we don’t do enough to trumpet successes of companies in this region. The point is that they’re all Philadelphia-based businesses. I don’t think it matters if they're located in the city or the suburbs. Get to know the companies, don’t wait until they come to you. Our investors tend to nest a little bit."

Still, Bookspan argues that if the startup community was located in one dense area, it would have a better chance to thrive. "We're missing the opportunity to create critical mass," he said.

But where should everyone go, asked Reyes. The Navy Yard? N3rd Street? West Philly? "I don't care, as long as we pick one," said Bookspan.

When asked if the group feels like they have a responsibility to mentor entrepreneurs and build up the startup community, most of the panel balked. "I’ve never given it a thought," said DiPiano. "We’re here to help build companies. If providing advice and helping to do that has an impact on this community — that’s terrific."

Richard Vague, managing partner of early-stage investor Gabriel Investments identified a paradox. "The strongest young leaders don't need much mentoring," he said. "If someone needs a lot of mentoring, it might be a problem. I don’t feel like I’m their mentor, I feel like I can contribute a little bit to their success — but I'm honored to do it."

Sashi Reddi, investment partner at Gabriel Investments called it "an honor and privilege" to help startups, and said it's "so much fun talk to entrepreneurs."

But Zarrilli disagreed with the group, saying investors have a "responsibility to the ecosystem."

"I do think we have a responsibility to the local startup community. We've got to carve out some time to give back," he said. "I hope in each year I get better at doing it – taking a call, sitting on the board of a nonprofit that needs your assistance. Sometimes it's supporting something financially, but more often than not, it's encouraging our team to give back to the community."

For the full story, click here.