Over the life of a venture capital firm, investors see trends come and go, market booms and busts, and of course, a series of pitches.
There is much to learn from two decades in business, Marc Ledermanco-founder and general partner of Radnor-based dedicated growth capital funds The capital of New Spring. Lederman and the other co-founders started in 1999 and have seen the VC firm through many iterations, verticals, deals and exits. You probably remember NewSpring from some of the biggest tech business acquisitions since 2000.
The firm recently made its 200th investment, leading a $50 million Series C for Customer Engagement Platform Hearty. As part of the deal, NewSpring’s partner Brian Kim will join Cordial’s board of directors. NewSpring also recently launched its fifth vertical financing and has $3 billion in deals under management, operating with approximately 70 employees.
Tips for today’s market
After the start amid the bust of the dot-com era, Lederman said Teknik.ly today’s VC market feels different. Tech companies are at an inflection point, and layoffs have become more common in recent months. What’s more, they’re being talked about: The term “beginner vacation” reached the highest point in Google searches in May since 2005.
“We’ve been fortunate to have done this for 23 years, we’ve made it through two full recessions, and we’ve had to help portfolio companies through it all,” Lederman said.
Valuations may be down again now, and we’re also dealing with high inflation. But we’re not in the same place as 2008, he said, when companies’ earnings dried up overnight with the uncertainty of the recession: “The world was kind of on fire,” GP said, as contracts were canceled and companies had to take difficult decisions, sometimes including letting go of talent.
But NewSpring’s goal is to partner with them and navigate through it. Advice? Don’t get too far ahead of yourself.
“Soften your burn,” Lederman said, and “don’t invest ahead of demand.”
Hindsight is 20-20 (years)
The region has fared well in the past two downturns compared to the West Coast, Lederman said, as Philly’s industries like health care tend to be a little more stable and its tech companies tend to be a little more capital efficient. You don’t see a ton of companies like Gopuffraising billions, around Philadelphia.
And a lot has changed about the Philadelphia VC landscape, too. When NewSpring was young and building its brand, it was hard to find a company that wasn’t running a big process in Silicon Valley. Lederman said most of the firm’s early investments went to companies in New York, DC and Philly, though it has grown a wide network since then.
While NewSpring’s partners still value the in-person connection, technology like video conferencing has aided the due diligence process, allowing its investors to monitor thousands of companies. Sometimes the team is following a company for a year or two before making an investment.
All three Mrs
When it comes down to it, two decades in investment have allowed the firm to come up with three ladies: management, market and business models.
“We’re looking for good teams, a strong CEO, a good core team,” Lederman said. “We’re supporting people – that’s still the most important part of this.” He added that NewSpring is looking for companies that want a good business partner and are interested in what, in addition to capital, the firm can offer.
“Market” means that the business operates in large, adjustable markets that will grow at a higher rate than GDP.
And finally, how strong is the business model? Is capital efficient? Will the company grow and grow without burning out? And is there something that sets it apart from the rest? Lederman said NewSpring will always look for businesses with strong recurring revenue models and “some stickiness,” not a product that makes them start over every quarter or year with revenue.