EDA APPROVES INVESTMENT IN EDISON PARTNERS LATEST EQUITY FUND
Edison’s Investments Fuel Growth of New Jersey’s Technology Companies
TRENTON (January 15, 2015) – New Jersey Economic Development Authority (EDA) CEO Michele Brown announced that the EDA this week approved a limited partnership investment in Edison Partner’s latest fund, which is aimed at bolstering the growth of New Jersey’s technology industry.
Managed by Lawrenceville-based Edison Partners, Edison VIII will invest in approximately 20 growth stage technology businesses in four key industry sectors: financial technology, healthcare IT, interactive marketing and digital media, and enterprise 2.0, which includes mobile, security and business operations software.
"The EDA’s investment in Edison VIII reinforces the Christie Administration’s commitment to nurturing technology companies at every stage of growth," Brown said.
To date, the EDA has approved investments in 12 venture capital funds for almost $40 million; these funds have leveraged the EDA’s investment in New Jersey businesses by more than 62 times. The EDA invested in four previous Edison Partners (formerly Edison Ventures) funds – Edison III, IV, VI, and VII. Through these funds, Edison Partners has invested $130 million in 25 New Jersey-based technology companies.
Edison Partners participated in last year’s Founders and Funders events, during which more than 60 entrepreneurs and start ups participated in a "speed dating" match up with 40 investors, paving the way for these emerging companies to attain the funding they need to grow in the State. The next Founders & Funders event is scheduled for March 10.
The EDA spoke with Chris Sugden, Managing Partner at Edison Partners and a member of the Edison VIII management team.
How does the EDA’s investment help support the fund?
From access to several of the most prestigious universities in the country to the support it shows to its smallest startup company, New Jersey provides a host of resources and opportunities to the technology sector. The NJEDA has been a great partner to Edison portfolio companies and the NJ technology community as a whole. Our companies take part in many incentive programs offered by the EDA. In addition, the EDA has provided capital directly to our companies through debt programs and the tax related NOL sale program. Finally, we guide all of our portfolio companies to engage EDA staff regularly regarding incentives and training grants available as they expand.
How do you select which tech companies to support?
Our investment strategy is clearly articulated on our website and Edison investment professionals are eager to speak with entrepreneurs even prior to making a decision to raise capital. We are highly selective in our investment process. The key attributes of our investments are: high growth (prior to taking capital), product completeness (use of Edison investment primarily to further innovation, sales and marketing) and a strong management team; The extensive talent pool of qualified New Jersey scientists and entrepreneurs is second-to-none. Beyond capital, our Edison Edge value-added services platform offers these companies advisory capabilities, a relevant network, and executive education programs to accelerate growth.
How do you determine the allocated amount to each portfolio company?
Initial investment in a company is determined by the entrepreneur or management team’s business plan. We often see business plans that forecast the need for less capital than will actually be necessary to achieve the team’s goals. One piece of advice I would offer is to be realistic about your plan’s capital needs and test your plan with mentors, angel investors and service providers who have experience growing high-growth businesses.
Additional or follow-on investments are determined by portfolio company performance. Follow-on investment dollars are intended for increasing growth rates. This is important, as our job is to deliver high returns to our investors. Over-allocating capital to companies that are performing poorly is a recipe for subpar performance by Edison or any investor.
What is the biggest success story to come out of the funds in which the EDA invested?
The good news is that we have several and, of course, we love all of our portfolio companies. Two that I would highlight are GAIN Capital and PHX, both located in Bedminster. Both companies have grown several fold since Edison invested. Each had fewer than 50 employees at time of our investment; today both companies employ hundreds. Gain Capital completed its IPO a few years ago and continues to grow. The human talent in New Jersey is a key differentiator that allows these, and our other portfolio companies, to scale quickly with the goal of becoming market leaders.