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.

PrivateEquityCentral.net is a division of HedgeFund.net, Inc.

Copyright ©2010, HedgeFund.net, Inc.

Burck Smith of StraighterLine (Gerald Martineau for The Washington Post)

Inessa Volkonidina had taken precalculus once and dropped it. She needed to take it again, and quickly, to fulfill a graduation requirement at Long Island University. She went online and found a company with an odd name, StraighterLine, that offered the course on even odder terms: $99 a month.
 
She thought it might be a scam. But StraighterLine, based in Alexandria, is a serious education company and a force that could disrupt half a millennium of higher-education tradition. The site offers students as many general-education courses as they care to take for a flat monthly fee, plus $39 per course. As college tuitions go, it is more on the scale of a cable bill.

The courses, standard freshman fare such as algebra, are cash cows for traditional schools, taught to students by the hundreds in vast lecture halls. They generate handsome profits to support more costly operations on campus.

General-education courses “comprise about one-third of all enrollment” in higher education, said Burck Smith, the company’s founder, “and they don’t cost colleges very much to deliver.”

Smith is an entrepreneur and self-styled educational futurist, educated at Williams College and Harvard, intent on using the personal computer and the Internet to offer college coursework more affordably than it has been offered before.

“College algebra is a commodity,” said Smith, 39.

Some scholars think Smith and his business model could seed a movement that reorders the higher-education industry, with students shopping online for individual courses rather than enrolling in one bricks-and-mortar school for four years. Tuition would decrease as technology lowers the cost.

But the company has been forced to battle for academic credibility. It cannot earn accreditation because it is not a school. Instead, it has struck deals with several “partner” colleges that accept StraighterLine courses for credit, which students can then transfer elsewhere. StraighterLine courses also are approved by the American Council on Education, another pathway to transfer credit.

Industry leaders say Smith’s company could pose a welcome challenge but not a threat to prestigious bricks-and-mortar institutions. StraighterLine is part of an exploding industry in online, for-profit education that has yet to diminish traditional college enrollment, mostly because the market keeps growing.

“It’s good for students, and these sorts of things do force traditional universities to rethink the things they do,” said Terry Hartle, senior vice president of the American Council on Education, which represents college presidents.

Volkonidina, 21, retook precalculus from StraighterLine during a month-long winter break. “I took a deep breath and I went for it,” she said. “My school, I believe it’s $830-something for one credit,” she said. “Here, for four credits, I paid $100.”

Smith, raised in Baltimore, is a product of the academy he seeks to upend. He attended Friends School of Baltimore, a college preparatory school, and says he treasured his time at Williams and Harvard. He doesn’t see StraighterLine competing against U.S. colleges with residential populations and name brands.

“They’re selling an experience, and it’s a great experience,” he said. “But that’s only 25 percent of the market.”

Smith’s potential consumer base is the large majority of students who enroll at community colleges, regional state colleges and for-profits such as the University of Phoenix, schools that often lack prestigious names or strong campus cultures.

“They want to know that they’ve mastered the material, they want to do it in a timely and convenient manner, and they want to do it cost-effectively,” said Frederick Hess, a higher-education scholar at the American Enterprise Institute.

Most colleges charge as much for online courses as they do for classroom instruction. Some charge more, tacking on a “technology fee,” said Kevin Carey, policy director for the District nonprofit organization Education Sector. “It’s the only industry,” he said, “where technology makes things more expensive.”

Eventually, low-cost competitors such as StraighterLine will probably drive down prices. “The market is going to speak,” said Daniel Hurley, an official with the American Association of State Colleges and Universities.

Smith said the StraighterLine concept came to him one day in 1993, as he fiddled with a dial-up modem. Advancing technology should make it easier and cheaper to connect instructors and students. An online lecture hall can serve an infinite number of students.

His idea led to Smarthinking, a company he co-founded in 1999. It grew into a $10 million enterprise by offering inexpensive online tutoring to colleges, a service they could not deliver cheaply on their own.

Smith launched StraighterLine in 2008 as a division of Smarthinking, but left the parent company last June because the new venture didn’t sit well with some of Smarthinking’s clients. Smith says his staff of five has served nearly 1,000 students, without any marketing. He has replaced the traditional classroom with a “call center model”: StraighterLine students who struggle are directed to the tutors at Smarthinking.

More than half of StraighterLine students successfully complete their courses, Smith said.

Daniel Levine, 27, of San Jose found StraighterLine on an online discussion board. He took English composition and economics at StraighterLine during a four-month blitz of scholarship that yielded nearly 80 credits, a mix of courses and credit-bearing exams. He’s transferring them to Excelsior College, a “virtual” university known for accepting unconventional credits.

Levine estimates that he will complete his education for less than $20 per credit.

“I think most people don’t realize,” he said, “that education is no longer a monopoly of larger schools that are going to cost a lot of money.”

———————————————————————————————–

original article: http://www.washingtonpost.com/wp-dyn/content/article/2010/02/25/AR2010022506012.html

Published : Tuesday, 23 Feb 2010, 11:35 PM EST

By MELANIE ALNWICK/myfoxdc

The economy has made getting a college degree hard for many students. But what if we told you there’s a place you can show up for a class whenever you’d like and go at your own pace—with a discount?

FOX 5 Money reporter Melanie Alnwick has the breakdown on a new approach to higher education that’s raising some academic eyebrows.

Links mentioned in this report:

Straighterline:
http://www.straighterline.com/

Education Sector:
http://www.educationsector.org/

American Council on Education:
http://www.acenet.edu/AM/Template.cfm?Section=Home

By Dawn Marie Yankeelov

Kentucky’s entrepreneurs depend on venture capital to invest in their dreams, and while investment of this type is down with the economy, the bright spots of its existence and persistence remain.

Roughly 10,000 new jobs a month are created from venture-backed companies in the United States – an average cited by Mark Heessen, president of the National Venture Capital Association, who spoke at the Venture Club of Louisville in January. Venture-created market sectors dominated by venture capital investments in the United States include: telecom (74 percent), software jobs (81 percent), semiconductors (55 percent), and electronics/instrumentation (67 percent).

The barbells of strength in the economy nationwide are in the fields known as clean tech (energy interests) and life science firms (intellectual property often taken from our universities). Kentucky, following the trends, started its own fledgling $5 million energy fund through the Kentucky Science and Technology Corp. The Kentucky Enterprise Fund, Rural Innovation Fund, and Kentucky New Energy Ventures provide seed-stage capital for high-tech startup companies across the state.

According to KSTC’s mission (startupkentucky.com), advancing science and technology in Kentucky is accomplished by:

• Providing seed capital for companies
• Creating business strategies to encourage success
• Working in collaboration with Kentucky colleges and universities

Deals that occur outside the state can also have tremendous impact in Kentucky as is evidenced by the largest deal of the year. Nationally, in the biggest venture-backed deal of the fourth quarter 2009 and the year, Amazon.com acquired Zappos.com Inc., a Henderson, Nev.-based online shoe retailer, for $930 million. Zappos has extensive distribution warehouse and fulfillment operations in Kentucky, including a 280,000 s.f. facility in Bullitt County housing over 1.5 million pairs of shoes.

Kentucky ranks 36th of the 50 states in overall venture capital investment, according to a recent report of the National Venture Capital Association. From 1970-2008, venture capitalists invested $731 million in 90 companies in Kentucky. Public companies in the states that were once venture-backed accounted for 32,734 direct jobs alone.

According to Heessen, the annual average venture capital investment in Kentucky from 2003-2008 was $32.1 million. Some of the top venture-funded Kentucky companies in recent years in the state have been Potential Pharmaceuticals Inc., The First Thirty Days Inc. (online self-help content), Mersive Technologies Inc. (multiprojector high-resolution display technology), Hosting.com (enterprise co-location cloud computing and disaster recovery), Petsuites of America LLC (animal daycare), Wazoo Sports Inc. (high school/college regional sports network), and OrthoData Inc. (develops spinal fusion diagnostic products).

Kentucky VC firm favors healthcare

David Jones Jr., founder of Chrysalis Ventures in Louisville, finds that healthcare is a strong sector for investment for his venture capital firm, Kentucky’s first and largest VC operation with more than $400 million under management. Since September 2008, Chrysalis Ventures has had seven new investments – six of which have been in healthcare. The firm invested $4.75 million in Open Kernel and $22.9 million in the six other healthcare deals – a total of just more than $27.6 million.

His firm was able to successfully exit two healthcare deals in recent years despite market conditions that made exits fewer nationally, including Michigan-based HealthMedia that yielded 18 times the initial investment with its acquisition by Johnson and Johnson. Under the leadership of HealthMedia’s CEO Ted Dacko and with the active guidance of Chrysalis managing director and HealthMedia board member Koleman Karleski, the company migrated from the business it had pursued prior to Chrysalis’ investment – customized marketing campaigns for pharmaceutical companies – into an organization that deployed sophisticated knowledge of behavioral change and advanced communications technology to help individuals improve their health and manage chronic illnesses.

Chrysalis, which has offices in Louisville, Cleveland, Pittsburg and Ann Arbor, Mich., has also been vested over the years in several venture-backed companies that are doing well in Kentucky, including Genscape and SinglePipe Communications.

Nationally, venture capital investment peaked in 2000 at $100.5 billion during the dot.com frenzy. It subsided to roughly $40 billion by 2007, with investments down nearly 10 percent in 2009 to $17.7 billion.

Kentucky part of VC’s education trend

Investments in companies involved in education will continue in the venture sectors, and Heessen surmised that universities as we know them today may not be around in 20 years – replaced in many cases by virtual and online-type classes and knowledge management. In fact, Jones said Chrysalis has invested in five distance education companies.

“Online education has exploded over the last few years due to economic factors and demands for more flexible learning options,” said Steve Huey, COO of Louisville-based Learning House. “Learning House has experienced an increase in revenue of 94 percent over the last two years. Furthermore, our 71 schools that span over 20 states have seen an increase in enrollment of 39 percent in 2009. Some of our Kentucky schools have seen an even greater increase in enrollments of 46 percent in 2009.

“Locating our business in Louisville, Ky., keeps our costs low so that the business can expand rapidly,” he said. “I predict we will see more venture capitalists enter this market in the next year as education remains one of the few areas of financial growth.”

Venture capital for firms is coming from many market sectors, not just the United States. Jones and Hessen pointed out that China, India and Israel have seen an increase in true venture capital firms.

“This is a net positive for the world. It enlarges the market possibilities and helps fund sectors focused on innovation in wellness and health,” said Jones.

Chrysalis Managing Director Koleman Karleski remembers the day he met the founders of Asterand, an exciting new start-up located near the Wayne State University campus. Asterand had developed an innovative approach to supplying human tissue samples to drug discovery researchers. “Chrysalis has a long history of identifying young companies that have exciting new technologies that enable the transformation in given industries, and in this particular case healthcare,” said Karleski. “The idea of making the identification, collection and distribution of unique tissue samples from around the world to empower researchers in universities and pharmaceutical companies to do their research more effectively was a compelling idea to us. We don’t have to be scientists, we don’t have to understand the science behind the research, but we can provide the picks and shovels for the miners in this case to do their work more effectively.”

The picks and shovels amounted to a major capital investment that’s starting to pay off. After a merger with Pharmagene, a drug discovery research firm in England, Asterand was awarded the best performing stock on the London Stock Exchange in 2008. Another Michigan winner with a substantial Chrysalis investment is HealthMedia, a wellness and prevention information-based platform founded in partnership with the University of Michigan and sold to Johnson & Johnson in 2008. Koleman Karleski calls the deal one of the best venture-backed exits of the year, and it energizes its team of Ann Arbor-based investment specialists on the lookout for new opportunities in the region. “Michigan is one example of a state that I view as under ventured, meaning that the amount of venture capital available to exciting young companies is relatively low compared to the coasts,” said Karleski, “but Michigan is full of creative, smart people, a great university system, and economic development programs that were put together in a coherent way. We’ve had two big successes in Michigan now and those successes are what keep us coming back for more. We believe you can build good, valuable businesses in Michigan.”

PITTSBURGH, Pennsylvania — Foundation Radiology Group has raised a $4 million Series B round of funding, according to a regulatory filing.

Louisville, Ky.-based Chrysalis Ventures led the round, accompanied by Health Evolution Partners and Foundation’s management team.

The company plans to use the funding to further invest in its technology and “expand its geographic footprint,” said Koleman Karleski, a managing director with Chrysalis, via e-mail.

Foundation is an imaging services company that has on-site and teleservices for hospitals and other health centers. Its services include neuroradiology, mammography, cardiac CT, pediatric radiology and general radiology, among others. Karleski said the company’s teleradiology services allow specialists to be “highly productive” compared with industry standards.

In April, Foundation pulled in from the same investors a $10 million Series A round that it planned to use to hire new radiologists and expand its diagnostic imaging and radiology services office.

Foundation “grew rapidly” last year and expects to continue that growth in 2010, Karleski said.

Earlier this month, Foundation announced a partnership in which it will provide imaging services to Leighton, Pa.-based Blue Mountain Health System.

Asked about Chrysalis’ exit plans for Foundation, Karleski said it’s “premature to speculate” on the matter. “However, most fast-growing, profitable companies have many strategic options, including future financing via a public offering and sale to a host of strategic acquirers eager to own valuable assets,” he said. “Let’s revisit this question in the coming years.”

Pittsburgh’s health industry received a bit of encouraging news last week courtesy of a report from Cleveland health care economic development group BioEnterprise. The group’s report on 2009 health care investment in the Midwest revealed that the Iron City had more start-ups, 24, that received cash than any other in the region. Overall, Midwest health care start-ups attracted $780 million in funding last year, a decline of 26 percent from the prior year.

The medical device and health IT company Emageon is a previous investor in Foundation.

In addition to its Louisville headquarters, Chrysalis has offices in Cleveland, Pittsburgh and Ann Arbor, Mich.

By Tom Eblen – Herald-Leader columnist Improving Kentucky’s economy will require more capital. Finding that capital, both human and financial, is likely to involve more small steps than big leaps.

Two groups are taking steps worth noting. They are the Young Professionals of Eastern Kentucky and the Lexington Venture Club.

The Young Professionals of Eastern Kentucky is a new organization that hopes to help talented young people stay in — or return to — Eastern Kentucky’s mountains. It is having its kickoff event Monday night in Hazard.

 ”We really want to combat the brain drain,” said Bradley Parke, 24, of Knott County, the group’s vice president. “There are a lot of people who leave and want to come back, but there’s just not the opportunities for them.”

The free event, which begins with a 6:30 p.m. reception at First Federal Center on the campus of Hazard Community and Technical College, will include speeches by U.S. Rep. Hal Rogers and former Gov. Paul Patton.

Kevin Smith, 26, a Laurel County native who lives in Inez, was inspired to start Young Professionals of Kentucky after reading Visioning Kentucky’s Future, a 2008 report by the Kentucky Long-Term Policy Research Center.

“There was a need for young professionals to come together,” he said, not only to create new economic opportunities for themselves and their communities, but to be more aware of opportunities already in the region.

“Many of us have a passion for this region,” he said. “We want to live and work here.”

Smith, Parke and others formed a steering committee and then a board of young professionals from across Kentucky’s 32 Appalachian counties. They applied for non-profit status and organized small get-togethers in London, Hazard, Prestonsburg, Somerset, Whitesburg and Pikeville.

“We’re pretty spread out, so we’re trying to reach every part of the region so everyone feels like they’re included,” said Parke, adding that online networking tools will be key. The organization has created a Web site (www.ypek.org) and a Facebook group with nearly 1,200 members.

In addition to networking, Smith and Parke said the group plans to form working groups to study and undertake projects around six themes: economic development; energy and environment; education; health care; technology; and civic engagement. That work will get started at the group’s next regional meeting, tentatively scheduled for early April.

They said the organization’s board includes Republicans and Democrats, and they’re being careful to avoid political associations that could limit their effectiveness in the region.

“We’re trying to say, no matter what your background or ideology is, we’re here to make a difference,” Smith said.

Meanwhile, the Lexington Venture Club gathered last week to discuss the state of venture capital funding in Kentucky.

The club reported that entrepreneurial companies in Central Kentucky attracted $47.5 million in venture funding last year for a two-year total of $116 million — not a bad showing considering the overall economic climate.

The 88 companies surveyed by the club said they hired 386 people last year, up from 230 in 2008 and 162 in 2007. The average salary for full-time jobs at those companies was $69,800, up from $61,000 two years ago.

Venture funding comes from a variety of non-traditional sources outside bank lending, such as venture capital funds, private investors and entrepreneurs and their friends and families.

It is a vital source of capital for young companies in fields such as technology and bio-sciences. Innovation is often a risky investment, but it can pay off big, both for investors in those companies and for their communities.

The gathering at Lansdowne’s Signature Club attracted nearly 200 people, prompting UK President Lee Todd to remark that Lexington’s venture capital and entrepreneur community “could not have filled a closet 10 or 15 years ago.”

The keynote speaker was David Jones Jr., chairman and managing director of Chrysalis Ventures in Louisville, the region’s oldest and largest venture capital firm with about $400 million under management. He also is non-executive chairman of Humana Inc., which his father helped found.

Jones said Kentucky is behind many neighboring states in creating the kind of innovative companies that can attract venture funding. A key to improvement, he said, will be for Kentucky to emphasize and invest more in education at all levels.

Reach Tom Eblen at (859) 231-1415 or 1-800-950-6397, Ext. 1415, or at teblen@herald-leader.com. Read and comment on his blog, The Bluegrass & Beyond, at Kentucky.com.

These are challenging times for businesses nationwide and perhaps no industry has been hit harder than construction.

“In spite of this – or perhaps because of it – iSqFt has continued to grow and thrive,” says Dave Conway, President and CEO of iSqFt. “While others in the industry have lost focus, we’ve remained focused on the goal of helping people find work. The more challenging the financial environment, the more people are concerned with more efficient ways of doing business, and iSqFt has a proven track record in this area.”

The iSqFt network connects tens of thousands of general contractors, subcontractors, suppliers and building project manufacturers and provides the tools that make it easy to do business with each other.

“What we do,” Conway explains, “is provide access to a network that allows GCs to find the right vendors, helps subs to find the right jobs, and provides suppliers and manufacturers with a place to market and sell their products. That’s an oversimplified version, but at its core, iSqFt is an online network that connects construction professionals in a way that’s much more efficient and cost-effective.”

GCs TAKE CONTROL OF THE PRECONSTRUCTION PROCESS

“iSqFt is designed to help general contractors become more efficient and more competitive as they exercise full control over their preconstruction process,” explains Conway.

Through iSqFt, GCs gain the ability to quickly communicate with bidders, post project plans, specs and addenda and get bids from a wider, more qualified pool of subcontractors and suppliers. A public database of vendors is geared toward helping GCs get not only more bids, but more competitive bids, with the option to prequalify all bidders.

“The Private Construction Office serves as an ideal location for a general contractor to house and manage his vendor database,” says Conway.

“Private vendor databases that are uploaded remain exclusive to that GC. At the same time, the GC gains access to our public vendor database and the opportunity to invite more bidders to supplement coverage on their projects.”

SUBS FIND MORE OPPORTUNITIES

“iSqFt is a breakthrough for subcontractors, too,” says Conway. “It gives subs a powerful tool for finding new work and better opportunities by positioning themselves in front of more general contractors.” The iSqFt network gives subcontractors the ability to search thousands of publicly bidding projects and easily find those that match their needs and capabilities. The Network also positions subcontractors in front of GCs at the exact moment they are looking for bidders. This allows subs to let general contractors know what type of work they perform and the geographic areas in which they are willing to work. “In this way, a sub can continually expand their business network so that they receive more Invitations to Bid on projects that are meaningful to them,” says Conway, “and the GC can have greater confidence that those he invites will be receptive to the opportunity.”

“We’re also proud that iSqFt’s growth has resulted in a greener business model,” says Conway. “iSqFt’s network of Internet Plan Rooms and Private Construction Offices have eliminated the need for contractors to drive to physical plan rooms, spared tens of thousands of trees and saved our customers millions of dollars in fuel, packaging, shipping, printing and labor costs.”

“When you can offer people something that makes their lives easier and helps them find work, you’re doing something right,” says Conway. “The rest just falls into place.”

Digital reprint authorized for email and website marketing. Copyright ©2009 by Construction Executive. All rights reserved.

Link to original article: http://www.isqft.com/home/newsdocuments/2010_HotProducts.pdf

StraighterLine, Alexandria, VA, a provider of online general education courses to postsecondary students.

At the show, Microsoft demonstrated how Digitalsmiths can help add more interactivity to Silverlight so viewers could click on a character, actor, or object and link back to more information on places like Bing, Weinberger said. Expect more details on the technology demonstration soon, he added. Digitalsmiths works with television and movie studios to manage the metadata and rights relating to their assets, so they can wring more revenue from their existing and library content. Customers include Warner Bros., TMZ, Paramount, and others.

Weinberger also shared some details on where Digitaltsmiths is headed next — the news and sports business. Digitalsmiths will announce new deals shortly in this area, marking the first time the company will apply its tools to a live viewing environment. Now it can be applied “to things like news and sports that are more current, live, temporal than what an episodic or feature film might be. We’ve actually recently signed a deal that we’re getting ready to announce with another studio, so stay tuned,” he told Beet.TV.

The company inked a deal late last year with Paramount to create a clip portal for its licensees to use when they need content from Paramount movies. Regarding content delivery, “now it’s what you want, how you want it, delivered the way you want it,” he said.

Daisy Whitney, Senior Producer