Welcome to the VC Round-up, where we’ll parse through venture capital news related to Philadelphia-based private equity firms and the companies they fund. Subscribe to the roundup as an email newsletter. If you have any VC-related news to pass along to us, please drop us a line.

DEFINITE READS

Edit: Kerry Rupp clears up a few facts in the comments below.

DreamIt Ventures gets a feature in this month’s Forbes focusing on managing partners Steven Welch, Kerry Rupp, Michael Levinson and David Book. The story provides a digestible overview for those not familiar with the University City Science Center-based business incubator and provides lots of numbers and personal backstory for those more knowledgeable about the program. The most surprising fact uncovered by Forbes: none of the companies incubated by DreamIt have turned a profit. Look out for our Demo Day preview on Wednesday to get a sneak peak at some of the companies in this year’s class.

MIGHT BE WORTH YOUR TIME

Movitas Mobile has raised $3 million from a yet-to-named source. In March we reported on SEC filings that indicated the company was gunning for $2.7 million. Movitas, if you remember, was also behind the acquisition of PhindMe Mobile a mobile development company based out of Drexel University.

Our good friend Christopher McDemus – aka the VC Deal Lawyer – has a comprehensive write up on the impact of the recently passed Wall Street Reform and Consumer Protection Act. The act has been widely covered for its reform of our nation’s financial system and McDemus helps liberal arts majors like us understand the impact the reforms will have on private equity.

GIVE A GLANCE

Pop City reports that Pittsburgh has seen a comeback in VC numbers. Fueled by Innovation Works, the Steel City startups closed deals at a four-year high.

DreamIt vet Seatgeek has received $1 million in funding for its ticket price predicting service.

Ben Franklin Technology Partners continues handing out checks, this time to clean technology companies. Though the $361,000 in investments is not nearly as large as the $1.8 million it invested earlier this month.

Welcome to the VC Round-up, where we’ll parse through venture capital news related to Philadelphia-based private equity firms and the companies they fund. Subscribe to the roundup as an email newsletter. If you have any VC-related news to pass along to us, please drop us a line.

DEFINITE READS
Philly Tech News is reporting that First Round Capital has invested in locally-based advertising company AdCopy, the company that inserts advertising into CAPTCHAs. Though we can’t verify it anywhere else, our friends at PTN are typically on point, so keep an eye out.

We’re a bit late on this, but Safeguard Scientifics’ Kevin Kemmerer extrapolates on one of the questions asked by Technically Philly during his Q&A earlier this month. Kemmerer, EVP and managing director of Safeguard technology group, explains why  Safeguard, a publicly traded company, is different than other VC firms.

Ben Franklin Technology Partners has invested nearly $1.8 million in nine local companies. Read our complete coverage here.

First Round receives praise for thinking ahead in this Silicon Alley Insider piece about the current and future state of venture capital. If you’re new to private equity, we highly suggest you give it a read.

MIGHT BE WORTH YOUR TIME

The President and CEO of BFTP, RoseAnn Rosenthal, has been named to the National Advisory Council on Innovation and Entrepreneurship. The council is selected by the U.S. Commerce Secretary and other board members include Jerry Yang, founder of Yahoo.

The New York Times gives a nod to Golden Seeds, the angel group with a presence in Philly that focuses on companies helmed by women.

GIVE A GLANCE

Speaking of Safeguard, the company is due to report its earnings on Thursday, July 29th.

Quaker BioVentures and New Spring Capital were named in a $6 million round for Nitric BioTherapeutics.

Fresh off of its investment in Lighthouse Inc, LLR Partners has invested $35 million in IOD, a medical information services company. IOD, basied in Green Bay, Wisconsin, serves over 1,800 hospitals.

Osage Ventures was named in a $4.33 million filing for Instamed, a healthcare payment network based in Bala Cynwyd.

There’s a new angel fund in NYC that aims to make a splash in the Mid-Atlantic tech angel market. ARC Angel fund, co-founded by the founder of VC rag The Funding Post, says its members average deals of $100,000 to $500,000. Call us crazy but that’s a little high to be considered “angel,” right?

Welcome to the VC Round-up, where we’ll parse through venture capital news related to Philadelphia-based private equity firms and the companies they fund. Subscribe to the roundup as an email newsletter. If you have any VC-related news to pass along to us, please drop us a line.

DEFINITE READS

According to Thomson Reuters, 38 venture capital firms raised nearly $2 billion in the second quarter of this year, a 49 percent decline from 2009′s numbers. The amount raised is the lowest since 2003. The uncertain economy has made it hard for firms to fundraise, said the report.

Comcast says it will be setting aside $20 million to invest in minority-owned businesses that are developing new media products. The company included the new fund, to be part of Comcast Interactive Capital, in its NBCU merger paperwork. A post on the Comcast’s blog says more news will come this fall.

MIGHT BE WORTH YOUR TIME

After having its budget cut last year, BFTP is moving to have its budget restored when the next governor is elected.

Our buddy Tom Paine reports that First Round Capital has invested in AdCopy, another local advertising company in the same league as Invite Media, though we couldn’t find many more details than that.

GIVE A GLANCE

Meidlinger Partners has joined in a $3.5 million investment of Environmental Operating Solutions, Massachusetts-based company specializes in wastewater treatment. University City-based Meidlinger specializes in investments that converse or treat water.

LLR partners has invested an undisclosed amount in Lightspeed Financial, a company that makes software for retail traders and other investors. The Inquirer’s Joe D reports that the number is $28 Million to finance Lightspeed’s acquisition of Terra Nova Financial, another software maker.

Welcome to the VC Round-up, where we’ll parse through venture capital news related to Philadelphia-based private equity firms and the companies they fund. Subscribe to the roundup as an email newsletter. If you have any VC-related news to pass along to us, please drop us a line.

Looks like VCs take the Fourth of July off too, who would have known? We’ll skip ranking our two stories this time and hope that the cash starts flowing this week for next week’s roundup.

According to SEC filings Accolade has raised nearly $17 million from Comcast Interactive Capital and other firms. The Plymouth Meeting-based healthcare services company isn’t in Comcast’s typical investing wheelhouse, so this one has us stumped. Any ideas, dear reader? Drop us a line.

Ben Franklin Technology Partners has partnered with World Trade Club to give the organization space in its Lehigh offices. The World Trade Club is a group created by by Air Products, Mack Trucks and Bethlehem Steel to exchange business information and network, according to the Allentown Morning Call.

The VC Roundup will deliver Philadelphia private equity news hot and fresh every Tuesday morning.

Welcome to the VC Round-up, where we’ll parse through venture capital news related to Philadelphia-based private equity firms and the companies they fund. Subscribe to the roundup as an email newsletter. If you have any VC-related news to pass along to us, please drop us a line.

Edit: Corrected source of Yodle funding.

DEFINITE READS

BFTP has announced its New Energy Plan, a contest awarding $35,000 to entrepreneurs looking to start a clean energy-oriented company. The contest deadline is April 15th, like your taxes.

First Round Capital has created an exchange fund for entrepreneurs. The fund allows portfolio companies to give up a piece of ownership in their own company for a tiny share of ownership in all First Round companies. Got that?

The Brookings Institution has released a report saying the state’s VC market is too small. “There are more things [the state] could do that wouldn’t impact the budget,” it says, citing BFTP as a step in the right direction.

MIGHT BE WORTH YOUR TIME

The Angel Venture Fair deadline is this week. The April event looks to gather 100 investors and 30 entrepreneurs at the Union League to help make investment connections. Fellas, we hear online media startups covering technology are hot. Just sayin’.

Blogging VC Fred Wilson reveals how he figures out ROI on his portfolio companies. “A restaurant may have a few good years but then lose its clientele and go out of business,” he writes. “A media product might do well for a decade but then lose its way and fold.” Here’s to a decade of Technically Philly, before we flame out and end up on True Hollywood Story.

GIVE A GLANCE

The state has allocated $5.7 million for nanotech investments through BFTP and the Pennsylvania Initiative for Nanotechnology.

According to a report by NVCA, 10-year returns have dipped in recent years, dropping from 14.3 percent from 8.4 percent. The report blames the fact that lucrative dot-com bubble investments are no longer included.

The MoneyTree Report has released a more detailed Q4 report.

MentorTech Ventures backed local advertising company Yodle has raised a $10 million in a Series D round. However, MentorTech was not included in the latest funding round, led by JAFCO Ventures.

Keystone Edge has a Q&A with Matt Bieber of Originate Ventures. We noted that 25-year-old Bieber got a promotion in last month’s roundup.

For the past five weeks, Pennsylvania has been operating without a budget as state legislators wrestle between a 16 percent income tax increase and cuts in state spending, among other points of contention between the Democratically-controlled House and the Republican-controlled Senate.

As a result, state employees are no longer being paid, and expired unemployment benefits are not receiving an extension (though a tiny no-frills emergency budget may pass soon).

Caught up in the hurricane of the state budget debate is BFTP, a state-funded early stage investment group that could see its budget slashed by up to 60 percent. The organization is now asking its constituents to help push their state legislator to keep the group’s funding levels intact.

Otherwise, a cut to the funding to BFTP could have a dramatic impact on the city and the region.

And if you’re a reader of Technically Philly, that probably means you.

If you count yourself among the Philly residents that believe, like we do, that the city is on the edge of becoming one of America’s premier entrepreneurial cities, a cut to BFTP will make that climb much steeper.

“Depending on the cuts that are made, even if its restored next year, the unraveling will take four to five years to reverse,” Southeastern BFTP CEO RoseAnn Rosenthal tells Technically Philly. “You lose capability, you lose connections and you lose presence.”

Since 1982, Ben Franklin Technology partners has been investing money into startups with the hope that properly invested seed money can circulate throughout the economy, and now the group is fighting to keep its current level of investment.

Currently, the organization receives $50.7 million in state funding. In his proposed budget Governor Rendell has only $35 million directed to the line item that funds BFTP. The House is currently proposing $30 million, while the state Senate proposes $20 million.

BFTP’S IMPACT ON PHILLY

The slash in funding could have a crippling effect on early stage investment in the state, and its effects will certainly be felt here in the Philadelphia region.

“If [our] line item is cut, you will see a dramatic unraveling in the entrepreneurial structure in the region,” Rosenthal says, adding that several university programs as well as organizations, like the Mid Atlantic Capital Group, also share money from the same line in the budget.

With state money, BFTP performs three main functions: early stage seed investment, the expansion of established companies and the support of the local startup infrastructure.

BFTP is often the first investor in local startups that are then able to lure follow-on institutional investment, in fact in all cases, it’s mandatory. Center City-based TicketLeap credits a $2 million investment by BFTP as a “seal of approval” that helped legalize the company for private investors.

Vuzit, the document sharing Web site based in the University City Science Center, also received their first round of funding from BFTP.

“That was a huge endorsement,” CTO Chris Cera tells Technically Philly. “Closing out our [initial round of financing] was much easier. They really stuck their neck out for us.”

The startup incubator DreamIt also received money from BFTP. In turn, DreamIt has provided early state investment and incubation to over 20 companies, many of whom are from out of the area and end up staying in Philadelphia when their term in DreamIt’s incubator is completed.

As part of the conditions for shelling out start up money, BTFP also guarentees that companies stay in the state of Pennsylvania.

A cut to BFTP may seem sensible now with the state running in the red, but the group is not an expense, it is an investment – exactly where state dollars should be flowing, if the focus is on returning money to the regional and the state economy.

“It’s the lifeblood of early stage investing in this area, its often the first money that comes into businesses,” DreamIt Co-founder Steve Welch told Technically Philly during a question and answer session two weeks ago. “If you get rid of Ben Franklin, companies five to ten years from now will not get that next round of VC funding.”

The exact impact is up for debate, but according to a report by the Philadelphia Economic League, BFTP returns $3.50 for every dollar invested. The exact figure and methodology has been challenged, most recently in Inquirer reporter Joseph DiStefano’s PhillyDeals column.

“I would suspect the number is much higher,” Welch said of the estimated $3.50 to $1 investment return. “[BFTP companies] have vendors that are local that they are spending money on, its creates a circulation funding in the early stage businesses.”

Indeed, it is nearly impossible to exactly follow the money, but a look in Technically Philly’s archives will tell you, many of the regions technology startups have received funding from BFTP, heck New York is even jealous.

If you fancy yourself as only a casual observer of the city’s entrepreneurial community, it may be difficult to visualize BFTP’s impact. Something Rosenthal thinks can be blamed on the long cycles that startups companies go through.

“These are technologies that will not impact the region tomorrow, Rosenthal says, referencing the group’s investment in nanotechnology eight years ago. “But at some point you will have a [product] that will help you, on a shelf.”

SUPPORT FOR BFTP

For now, the group is preparing for several scenarios, including one where funding is drastically slashed. But the news is getting better.

Newly confirmed secretary of the Department of Community and Economic Development George Cornelius said that “The Bens are top priority” at his first press conference and response to BFTP’s “Call to Action,”which we reported on last month, has thus far been strong.

“We’ve gotten a tremendous response,” she says, “and [our supporters] need to keep doing that. Focus on the legislative leadership, they need to keep hearing that Ben Franklin is important”

If you’d like to support BFTP, visit the call to action section of their Web site.

The Penn State grad founded the Mitos Group, a biotech company that grew to over 40 employees before it was sold to a Fortune 500 company when Welch was 29. Welch then co-founded DreamIt ventures, an early-stage incubator based in the University City Science Center. And, most recently he just fathered his second child.

But 32-year-old Welch, the new-father-entrepreneur-angel investor, is looking to add another job title to his resume: congressman.

Earlier this month, he launched his candidacy for the 7th congressional district of Pennsylvania with a video on his Web site.

Welch will become the Republican challenger to Democratic representative Joe Sestak. Sestak ultimately may not be his opponent, as he is said to be considering a showdown for the Democratic Senate seat against newly-minted Democrat Arlen Specter.

If elected, he would be the second youngest congressman, behind 28-year-old Aaron Schock (R- Minn.).

True to his past, Welch sees small business as the way out of the recession for the country and for Philadelphia. Welch says the level of spending and government impact on the free market is one of the primary reasons he is running. When we spoke, his second child was still on the way, and the thought that he would be born into debt was a motivation to act.

For the past year, Welch was an Eisenhower Fellow, which allowed him to travel the world taking notes on the best tactics for encouraging small business development.

“In my heart of hearts, I love seeing a need in the marketplace and rushing to fill that need. It’s the greatest rush in the world,” says Welch.

One plan he is fond of, he said, was the tactic of the government matching local early stage investments. That way, firms can decide what is the best investment, and the government can increase the flow of early stage capital with little to no additional labor or bureaucracy.

“We want the best in the world to land in Philadelphia,” he says, “that’s the greatest way to ensure long term success in this region.”

We chatted with Welch about small business in Philadelphia, and the effect of organizations like DreamIt and Ben Franklin Technology Partners.

One of the hot issues at the moment, is the future of Ben Franklin Technology Partners, what is your take on their future?

Ben Franklin companies have had a huge impact on this region. Somebody that’s never been in the business doesn’t understand that once that money goes into a Ben Franklin-funded company… Give me a Ben Franklin funded company.

How about Vuzit?

Vuzit! So Vuzit has vendors that are local and that they are spending money with. They have attorneys that they are spending money with. It creates a curculation of funds in the early stage of businesses, which is undeniable. You look at any stat out there and you will see that small businesses create jobs, not big businesses.

That was something that was often tossed around during the presidential election.

Yep. And if you look, the patents filed by small businesses are more relevant, they get cited more often and [generate] more sales revenue. So small business are more innovative and therefore have a greater impact on society … If jobs are the government’s number one priority, [Ben Franklin Technology Partners] is the last thing I would cut.

What role does DreamIt play in fostering small businesses?

We’re very early-stage, we often invest in ideas on a napkin. So they have a long way to grow.

Last year we had several companies that got additional funding and that added jobs in the area and those companies will have a big impact. We are bringing companies here now, and once they are here they are more likely to stay here so they will add jobs to the region.

The 7th district of PA (click to enlarge)

Can you detail how DreamIt works?

We open up the application for a couple of months, this year we received several hundred. We care about what’s the need in the market place, what makes your product different and what makes you think you can do it. If it takes you more than an hour to finish our application, you’re doing it wrong.

We have some companies that are already generating revenue .. and some companies come in and do a 180-degree turn, and that’s great.

How so?

If you find that out fast, good, and you can change directions. And that is one of the things we need as a society. We need risk-taking to occur. We need to see what works and doesn’t work. That’s how you create innovation, that’s how you create new markets and that’s how you create jobs.

Aside from being jealous of our World Series rings, New York is also envious of our state’s spending on incubators, specifically BFTP, even as its fate is wavering on the winds of a state budget battle.

“Pennsylvania annually puts $20 million in taxpayer dollars toward new technology businesses…. So where is New York’s equivalent?” writes Matthew Daneman of the Democrat and Chronicle, a newspaper based out of Rochester, New York. A similar article also appeared in the Buffalo News.

But do they really want the cost?

The Economy League report that suggested for every $1 the state spent on BFTP $3.50 came back was more than called into question by Inquirer columnist Joe DiStefano.

The N.Y. article references another recent study, one by a Rochester-based venture fund that examined other state’s methods of supporting young startups, and Pennsylvania came out as one of the states worth emulating. The study fears that if support systems are not in place, startups will just flee to states like California and Massachusetts.

New York also trails the Keystone Sate in jobs created by venture capital funding.

Philadelphia is the 11th largest venture capital market in the country and features some of the country’s better early stage investment groups such as DreamIt Ventures and Ben Franklin Technology Partners. Early stage investments have kept the regions venture market afloat as traditional invesments plummited last quarter.

In which we link out to the tech news from Philly and elsewhere (when it matters) that slips through the cracks and make it way fun.

The state budget deadline came and, like every other year of Gov. Ed Rendell’s tenure, it went by without a completed plan.

This year, though, the fight has something to do with the state collecting $3.5 billion less in taxes than it anticipated. So everyone’s feeling the pinch. Even, it seemed, Ben Franklin Technology Partners, the state-funded, startup investment company that we reported could see a $10 million, 60 percent budget cut or more — and then others did too.

But the Inquirer’s Joe DiStefano thoughroghly researched the report, suggesting that the report BFTP pointed to in its defense was less than square — a report from the Pennsylvania Economy League that showed BFTP bringing in $3.50 for every $1 invested in it.

“That’s not real,” DiStefano wrote. “The authors [of the report] estimated, and extrapolated, and multipliered, using what the Economy League’s Rich Stein told me were “quasi-experimental” techniques.

According to his article, the state put $50.7 million into BFTP this year, a total Rendell wants to cut to $35 million the coming fiscal year. The original Senate Republican budget put it nearer to $20 million.

Little question remains whether BFTP has done good, but much debate, DiStefano clearly shows, can be had on if it’s done enough to avoid one of the largest state budget tightenings in recent memory.

After the jump, Michael Nutter is not on Twitter, a biomedical firm brings jobs to Philly and six other tech and innovation links you need in your life right now, including our most read story of the week.

Ordered by an incredibly complex algorithm rendering importance:

• Inquirer City Hall blog Heard in the Hall reports that Philadelphia’s city administration is noticeably absent from the nation’s Twitter obsession. They also add that the Michael Nutter on Twitter ain’t really Mayor Michael Nutter, but an impostor.
• The New York Times BITS blog reports that the government of the 67th ward has invited software developers to develop applications to let Internet users navigate large data collections, like inspections and events. It’s about transparency and innovation. Yo, Allan Frank, why didn’t this happen in Philadelphia first [PING!]?
• ZDNet shares an interview with Navid Safabakhsh, a principal at San Francisco and Center City-based interactive web development agency Freshout, on his firm’s use of open source, collaboration and other technologies to help companies better use the Web to connect to customers.
• The Business Journal reports that biomedical firm EResearch Technology said late Monday it is moving a 30-person customer care team to its new headquarters on Market West, Center City. With a city that may have finally begun to halt its plummeting population, even small job additions are bright spots.
• The Financial Times reports that Microsoft is putting Internet ad agency Razorfish, with Center City offices, up for sale.  via CNET
• The Associated Press reports that the worst may be over — at least for the U.S. tech market.
• The AP also reports on the surprise reversal from the Chinese government on PCs with built-in search filters.

• Our Most Trafficked Story of the Week: SEPTA opens Google Transit data to third-party developers

Every Friday morning we make sure you didn’t miss anything with Friday Tech Links.

Art taken from Ben Franklin Technology Partners' 5-year Plan.

Yesterday, we reported that because of a State budget crunch, Ben Franklin Technology Partners faces the possibility of funding cuts. As the July 1 budget deadline looms, the organization might see a $10 million cut proposed by Governor Rendell or a 60 percent cut in funding proposed by Senate Bill 840.

tweeted:

Thanks to a tip from a reader, Technically Philly has learned that the Southeastern branch of Ben Franklin Technology Partners has streamlined ways to contact legislators to tell them how important the organization has been to the region and the state.

Last month, both Allentown’s Morning Call and Harrisburg’s Patriot-News ran op-eds written by top BFTP execs that cite the tech incubator’s influence.

Ben Franklin Tech Partners have appeared often on this site. In our short 4 month existence, the company has invested $3.4 million in 19 regional companies in two deals. That’s only a small chunk of the $130 million invested in the region during the last 25 years, and that’s not including state-wide investment.

In March, an independent study showed that tech companies funded by the network generate 5 more jobs each year and paid 33 percent better than companies not funded. Since 1989, the organization claims to have boosted the economy by more than $17 billion and created 125,000 job-years of full-time work.

For every $1 invested in Ben Franklin Technology Partners, $3.50 is returned to the state treasury.

Though no budget has passed on time since Rendell took office, he warned state workers last month that if the budget is late, they would not be paid on time until the budget is cleared.

Staff reporter Christopher Wink contributed to this story.