MissionOG, a group of Philadelphia venture capitalists, say they have raised $93 million for MissionOG Fund II, five years after starting their original $29 million fund to invest some of the cash they raised by selling their own local companies.
“A prominent, national investment firm is being built here in Center City Philadelphia,” said cofounder and managing partner George Krautzel, who reached out to a couple of peers to start the firm after a “sabbatical with my kids” after selling his previous company.
Back then, in 2013, Krautzel told me that cloud computing — the switch from in-house computer servers to remote systems run by Google, Amazon, and other tech giants — had made it a lot cheaper to start a software-based company. “But the expertise you need is maybe even higher than it was,” he added.
“If you go to try and sell a product into Comcast or Verizon” — let alone attract big companies as buyers for small start-ups — "you have to be pretty buttoned up. Investment capital buys you time, but it doesn’t buy you success. Experience beats intuition, in this business.
“So we think there’s a great opportunity for us to help business-to-business growth technology companies, that have proven out commercially, and are trying to scale up and grow. We’ve been there; we can provide them, not only money for growth, but also our experience, and time.”
Six years later, after raising a fund three times as big as its first, MissionOG might look at first glance like the kind of hometown investment firm Philadelphia needs. Founders include:
Krautzel, who with a partner sold his self-funded research firm, ITtoolbox, to Corporate Executive Board, Washington, D.C., for $58 million in 2007;
Andy Newcomb, who with his partners built the Conshohocken debit-card systems developer Ecount and sold it to Citigroup for $220 million in 2008;
Eugene Lockhart, a former CEO of MasterCard, venture capitalist at Oak Investment Partners, and veteran Philadelphia-area financial-tech investor.
The trio have since built up a support staff of young analysts and directors, plus an advisory board of Philadelphia and New York tech CEOs, including Ellen Alemany, chief executive at national lender CIT Group; Paul Melchiorre, South Philly-bred chief revenue officer at fast-growing Anaplan Inc., San Francisco; Matt Gillin, chief executive of Radnor-based Relay Network; and others.
The OG stands for Operators Group, underlining the fact they’ve done this before — though the founders joke they also answer to “Original Gangsters.”
Investors in the new funds include Philadelphia-area private and corporate investors, and a group affiliated with the state-funded Ben Franklin Technology Partners.
“Their strategy is to focus on specific market segments in which we believe they have deep expertise, and can provide high engagement, post-investment,” says James McGrath, chief investment officer at LGL Partners, a Conshohocken firm that grew out of investor Brook J. Lenfest’s Brooks Capital Group, which invested in the first and the most recent MissionOG Funds.
MissionOG invests from $1 million to $10 million, typically alongside partners including Bain Capital Ventures of Boston, Edison Partners of New Jersey, and other national and regional funds.
The only thing that would complete the picture, from a local point of view, would be a focus on Philadelphia-area start-ups.
Alas, like LLR, NewSpring Capital, and other larger, locally based funds that buy private companies, the MissionOG team has had to cast its nets far from the city. Just five of the firm’s 25 previous investments — and none of the first seven reported by Fund II — are in the Philadelphia area.
To be sure, born-in-Philly firms rank among MissionOG’s early hits.
In 2016, MissionOG and other investors sold OneTwoSee, a “fan engagement technology provider” based in Center City, to Comcast for around $15 million.
In 2017, MissionOG-backed Cloudamize, founded by Khushboo Shah, which built infrastructure analytics to help companies move their systems offsite “into the cloud,” was purchased by a firm controlled by the private-equity giant Blackstone, more than quadrupling their investment in four years.
The group’s most profitable “exit” to date, says Krautzel, was FactorTrust, an Atlanta credit-risk reporting agency purchased by the consumer credit reporting giant TransUnion in 2017. MissionOG won’t say how much it grossed or netted for clients on that deal.
So far, Fund II’s early investments include:
- Alkami, a Plano, Texas, company that sells “seamless functionality across all digital devices” for bank and credit union clients.
- BridgeFT, a Chicago automation software service for financial advisers.
- Brightfield, a Washington, D.C. company that boasts “the world’s largest workforce-data network” supporting corporate IT, procurement, finance and HR.
- DemystData, a New York financial institutions database-optimization maker.
- FeatureSpace, a U.K.-based behavioral-analytics tech maker focused on fraud and risk management.
- Payclip, a Mexico-based mobile-payment card-acceptance system.
- Venminder, an Elizabethtown, Ky., company that makes risk-management systems for financial services firms.
They’re also looking for deals close to home, insists managing partner Newcomb.
“We grew businesses in [Philadelphia], as operators, and appreciate it once again as investors” — as a base, as well as a hunting ground for new deals as the city’s underweight tech sector makes up for lost time.