Meet the Manager – At the Speed of Information

Private Equity Central.net, March 1, 2010

Wright Steenrod, a principal at Chrysalis Ventures, talked with PrivateEquityCentral.net about investing in the technology and healthcare spaces, and why this is a good time to be involved in both.

Chrysalis had an active 2009, despite the economic downturn, and Steenrod told us how the firm was able to keep a fast pace. He told PrivateEquityCentral.net about his firm’s investment strategy and why it works.

PrivateEquityCentral.net: Can you please tell me a little bit about Chrysalis Ventures, what your firm focuses on, etc.?

Wright Steenrod: Chrysalis is an early-stage venture fund. We focus on the Southeast and Midwest parts of the United States. We invest in the healthcare and technology sectors.

PEC: This must be a good time for Chrysalis because many investors are saying both healthcare and technology are where the smart money goes in venture. Do you agree with that?

WS: Yes. In 2009 we made seven new investments. Six of them were in the healthcare sector.

Generally speaking, our healthcare strategy is that regardless of what system of healthcare is provided, the escalating cost is breaking the system. If you invest in continually innovative technology solutions that reduces deficiencies and increases productivity, those can be positive investments going forward.

PEC: Can you tell me a little bit about some of those investments your firm made last year?

WS: One of those investments was in a company called Foundation Radiology out of Pittsburgh. This company helps hospitals in smaller markets more efficiently purchase used radiology services.

Another is called AchieveCCA, which provides debt management to healthcare patients. As more individuals are more responsible for paying for their own healthcare, if they get into financial trouble, then that is a problem for the hospital.

Our products help patients manage hospital debt in addition to any other debt they may have.

PEC: It sounds like your firm was quite active last year. What was the reasoning behind that?

WS: We were investing out of our third fund, which closed on $175 million in the early part of 2008. We had made some deals prior to that, so that has allowed us to invest fairly consistently.

We certainly saw in 2009 some very attractive investments for which we felt we could get value in the years ahead. We are happy about the choices we made in 2009.

PEC: What does 2010 look like for the firm? Will you maintain that same investment pace?

WS: We remain active in both sectors, but we do not set goals for the number of deals we want to accomplish a given year. We still have capital and we are selectively looking.

PEC: Your particular focus is on technology. What is it in that sector that you are seeing these days that excites you?

WS: We are really core information investors. We invest in businesses that have some sort of competitive advantage through information.

We have, what we describe, as an information pyramid.

At the bottom of the pyramid are raw materials and information. That can be a hosting business; we invested in a company that bought wireless spectrum. That was an example of the raw materials and information.

At the top of the pyramid are core information services themselves. Those are businesses that own proprietary information and sell it to others. We have had several successful transactions on companies in that space over the years.

An example of that is Genscape. That company assembled a bunch of proprietary information about the power being produced at power plants. They aggregated and sold that data to energy traders.

In the middle of the pyramid, we have what we call the enabling information technologies. They may not own data, but they help to unlock or unleash data in a way that creates value.

One of the companies we are invested in now is located in Raleigh-Durham, N.C. called Digitalsmiths. That company builds, what we believe is, the most comprehensive set of meta-data around professional entertainment content like movies. It includes customers such as Paramount and Warner Bros. We believe an understanding of how that data is built and what it can be used for will help existing players more efficiently manage their content, as well as expand revenue opportunities going forward.

PEC: What do you think the future holds for the technology sector?

WS: We think there is a lot of opportunity going forward, that it is a great time to be an information entrepreneur because the pace at which information is available is increasing exponentially. We have traditionally been able to build businesses to help people connect the dots around information. We think there has never been greater need for businesses that can do this while being awash in information.

 

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