VC Profile: Radnor's Cross Atlantic Capital Partners

Cross Atlantic Capital Partners has been a relatively quiet venture capital firm compared to some others located in the Philadelphia area. But the Radnor-based firm (also known for short as XACP), with more than $500 million in assets under management, has had its share of major success stories.

Cross Atlantic truly spans the Atlantic, with offices in Ireland and Scotland, and portfolio companies based over there as well. A significant portion of its capital base comes from two co-investment funds it manages for the the Pennsylvania Public School Employees’ Retirement System (PSERS). It focuses on the commercialization of patented or specialty know-how in early to mid-stage technology companies. The firm was founded by Chairman and CEO Donald Caldwell, who had previously served as President & COO of Safeguard Scientifics. It raised its first fund in 1999.

Significant exits have included leading software as a service (SaaS) provider Netsuite (IPO), Rubicon Technology, which manufactures materials for light-emitting diodes (IPO), Kanbay International, a technology consulting firm (sold to Capgemini), and Ecount, a provider of internet-based payment systems(sold to Citi). It also recently sold a small stake in ICG Commerce of King of Prussia, a once struggling but now successful procurement outsourcing provider, back to its founder Internet Capital Group.

Cross Atlantic recently lead a $6.1 million Series B funding round in King of Prussia's Health Market Science (HMS), which provides an extensive database on healthcare providers. Cross Atlantic invested $4 million, and was joined by return investor Edison Venture Fund of Lawrenceville, New Jersey and other institutional investors. This was XACP's first investment in HMS; Edison has invested a cumulative total of $18.5 million in the company. XACP Managing Director Richard Fox joined the HMS Board of Directors.

Although HMS has traditionally focused on serving the marketing function in the healthcare industry, Cross Atlantic sees opportunities for significant growth due to changes in the healthcare regulatory environment, the Healthcare Reform Act and the HITECH Act. One example is real-time prescriber eligibility validation services, which helps prescibers meet federal, state, Medicaid and scope of practice eligibility attributes. A major area of potential growth is Master Data Management, in which HMS uses proprietary tools to help match and integrate various sources of data for the customer, and maintain the database on an ongoing basis, either on the customers's premise or via a cloud-type service.

Health Market Science reported revenue of $22.1 million in 2009, compared with $28.7 million in 2008,according to Inc. Magazine's Inc. 5000 issue. (These figures are presumably correct as they are self-reported by the company.) This followed several prior years of strong growth. In a telephone interview, Fox declined to discuss HMS' current financial position except to say that they expected growth of 15 to 20% this year (and have recently posted several open positions).

Another recent XACP investment that Fox is enthusiastic about is Interactions Corporation, a Massachusetts-based provider of interactive voice response (IVR) systems for call center management.

Other Philly-area companies in the XACP portfolio include Voxware, a Hamilton, New Jersey provider of voice-directed systems for warehouse picking applications, and NTERA, a Radnor-based producer of printable electrochromic materials for display and color-changing applications used in Smart Cards, Smart Packaging, and Smart Objects. MobileAware, which is based in Ireland, has its US offices in South Jersey.

Another interesting fact about XACP is that it has an outstanding patent lawsuit against Facebook. The suit, Cross Atlantic Capital Partners Inc. v. Facebook Inc, was filed in 2007 on the basis of a patent XACP owns via a former startup entitled "System for creating a community for users with common interests to interact in" that was filed and issued before Facebook was launched. In September 2009, the Patent & Trademark Office examiners issued a decision that reaffirmed the validity of XACP's patent; Facebook is currently challenging that decision before the Patent Office Board of Patent Appeals (though even if Cross Atlantic's patent claim is upheld, the process will be far from over).