Profile: Safeguard Scientifics
Focus: Growth-stage technology and life sciences businesses
Mission: A publicly traded holding company, Safeguard Scientifics seeks maximum growth for growth-stage technology and life sciences businesses by providing capital, as well as a range of strategic, operational and management resources.
Safeguard has $100 million in a portfolio that includes 15 companies: eight technology companies and seven life sciences companies. Last year the company netted $46 million from the sale of Mantas, Inc. and the IPO of Traffic.com. It was the first profitability for the company since 1999 and the dot com crash.
AVM: Safeguard focuses on tech companies and life sciences businesses with a specific focus on Software as a Service (SaaS) and the opportunities in this field. What do you see ahead for the SasS field?
Peter Boni: We do favor the business models that come with the recurring revenue stream that SaaS, and also technology enabled services, and we also believe there are a few vertical markets that have more opportunity for entrepreneurs than not, in the financial services sector, health care sector and certain Internet-based businesses.
AVM: In using Beyond.com as an example, how does Beyond fit into Safeguard Scientifics' portfolio? Safeguard provided a $13.5 million Series A round to Beyond.com, a software provider for niche online job sites, to grow its network.
Peter Boni: Beyond we looked at as an expansion capital opportunity, where we absolutely can help them, provide some operational support services to facilitate the growth of their business and give them some strategic guidance to build some value in their business in going forward.
What makes Safeguard's status as a publicly-traded company compared to private venture capital firms an advantage to entrepreneurs?
Peter Boni: We are different in many respects, we don't play as early as the venture capital community, nor do we play as late as the private equity community in terms of the maturity of the company in which we've placed capital.
From the entrepreneur's standpoint, our business model is very different, we are not forced to do a premature exit of a company in order to return capital, our model is such that when we have an exit of a company, that money goes on our balance sheet, it is protected from taxes by our net operating losses and we become self funding. And as such, we have a lot more patience built into our model to build value and then help partner with the entrepreneur to realize the value that we built.
AVM: In addition to a strong management team, what other items to you consider key requirements?
Peter Boni: We like to think the firms have revenue or have revenue opportunity. In life sciences the revenue might be zero but they are past phase 3 of the FDA and they are really ready to go to market. We want the opportunity to place between five to $50 million in capital, depending whether we are primary or minority shareholder...
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