Ben Franklin/SEP uses additional funds to focus on 'surviving and thriving' firms during pandemic
This article was originally posted in the Philadelphia Business Journal.
By Leanna Tilitei – Staff Writer, Philadelphia Business Journal
Jul 18, 2021 Updated Jul 19, 2021, 12:10pm EDT
Ben Franklin Technology Partners of Southeastern Pennsylvania, a state-backed nonprofit, invested $6.9 million in 46 companies in 2020, over $2 million more than the year before.
Ben Franklin Technology Partners of Southeastern Pennsylvania, a state-backed nonprofit, invested $6.9 million in 46 companies last year, an increase of over $2 million from 2019. BFTP receives funding from the state, the previous year's returns, and partner capital – which includes universities like Temple and Drexel along with health care companies like Independence Blue Cross Blue Shield. Roughly two-thirds of BFTP's funding comes from the state, though the figure was slightly higher in 2020.
The seed fund received an additional $1 million in April 2020 from the Department of Community and Economic Development to supplement its $3.5 million from Pennsylvania's standard challenge grant. BFTP matched the $1 million to deploy $2 million in total new capital to help struggling startups stay afloat and help fight Covid-19.
The state's additional $1 million helped BFTP fund 23 different startups in six weeks at the beginning of the pandemic.
Even with additional funds, however, the seed fund's total portfolio dropped to 211 companies, 24 fewer than in 2019. Due to the economic crisis caused by the pandemic, smaller and newer companies dissolved faster than normal because it was harder to raise capital.
As a result, about 20 of the 46 investments were follow-ons to support the growth of firms the fund had previously invested in rather than investments in new firms, BFTP CEO Scott Nissenbaum said. Investments throughout the year include Allevi, BioVeras, DrayNow and Aevumed.
"Rather than having the flexibility to do new investments, we really wanted to focus on the deals that we already have to make sure the companies that we work with are surviving and thriving," Nissenbaum said. "Many of the new companies we would normally invest in were either dissolved, wound down, or liquidated quickly due to the pandemic."
The seed fund's companies also created fewer jobs and lost more employees. BFTP's total portfolio created 338 jobs last year, over 200 less than in 2019, and retained 2,556 employees, 100 fewer than in 2019.
Despite these setbacks, the pandemic and rise of social justice protests pushed the seed fund to invest in organizations rooted in social impact work. Of the 46 new investments, 74% went toward social impact companies, up 31% from 2019.
Health care firms received the most investments at 24, information technology businesses received 16, and physical science companies received 10.
Nissenbaum cited the extensive growth in the health care industry over the last 10 years, along with the sector being one of few that profited from the pandemic, as reason for investing in so many health care companies.
"We did a deep dive in the portfolio and identified about 23% of the companies that were very clearly negatively impacted from Covid," Nissenbaum said. "However, about 6% were dramatically positively impacted in areas like telehealth, behavioral health, and food delivery."
BFTP's total portfolio of companies is 58% social impact-based, 22% minority-led, and 21% women-led.
For fiscal 2021, the seed fund projects to invest around $7 million in companies across Southeastern Pennsylvania.