NewSpring Capital in legal battle with ProfitPoint founders

Tom Paine
Follow @phillytechnews


Radnor-based NewSpring Capital has responded to a lawsuit from the co-founders and former executives of Clifton Heights (Delaware County)-based ProfitPoint, LexisNexis's Law360 (subscription required) reports. ProfitPoint specializes in stored value gift card and customer loyalty programs for retailers. NewSpring Ventures II LP led a $6 million round in 2007, and in 2008 ProfitPoint moved its headquarters and many employees to Clifton Heights from Franklin, Tennessee.

ProfitPoint founders A. James Battista and Vaden Landers filed a complaint in July of this year against NewSpring, claiming the PE and VC firm went behind their backs to take control of the company away from them and remove them, and then engaged in an ongoing smear campaign against them that damaged their future business prospects.

In its "preliminary objections to plaintiff's amended complaint" filed on October 25, NewSpring says that a heads up from the company's chief financial officer in 2009 alerted them to possible irregularities at the firm, and a subsequent audit confirmed serious wrongdoing. A settlement reached between the parties led to Battista and Landers departing the firm in 2010. NewSpring said in its filing that "this is a case brought by two disgruntled founders of a company that, through their own misdeeds, failures and mismanagement, were terminated after they were caught using the company as their own personal piggy bank.”

NewSpring also objected on more technical grounds, saying the statute of limitations on the defamation allegations had expired, that NewSpring Capital was wrongly named as defendant since the firm had not invested in ProfitPoint (the LP had), and that Philadelphia County was an improper venue since all the principals involved were based in Delaware County.

Founded in 2003, ProfitPoint was ranked at 1379 on the 2010 Inc. 5000, with 2009 revenue of $12.4 million up from $4 million in 2006. In 2008, it ranked 59th on the Inc. 5000. But apparently revenue took a hit from various problems that occurred afterwards. ProfitPoint raised another $1.25 million in 2010 according to an SEC filing (possibly from NewSpring), and secured a $2.5 million credit facility from Square 1 Bank last year. ProfitPoint was a featured presenter at this week's IMPACT2012 Mid-Atlantic Venture Summit in Philadelphia, meaning that it is hunting for more capital.

Kutak Rock LLP represents the plaintiffs. NewSpring is represented by Pepper Hamilton LLP. A. James Battista et al. v. NewSpring Capital et al., is case number 120703905, in the Philadelphia County Court of Common Pleas. NewSpring principals Glenn Rieger and Michael DiPiano are also named as defendants.




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Philly Tech TidBits 9/8/2011: InstaMed raises another $5.5 million

InstaMed, the Philadelpia-based provider of healthcare payment systems, has raised an additional $5.5 million, according to an SEC Filing. Headed by Founder, President and CEO Bill Marvin, InstaMed raised $6 million in debt and equity one year ago and had prior funding rounds in 2009 ($6 million) and 2007 ($5 milion), so it has now raised at least $22.5 million. Investors have included Osage Partners, NJTC Venture Fund, US Bancorp, and Ashby Point Capital. Josh Kopelman was an early investor through his personal Midas Capital fund.
InstaMed has several Penn/Wharton connections among its management team, board and advisors; Marvin played on the varsity squash team at Penn (as did Comcast's Brian Roberts). Bill was an executive with Accenture’s Health and Life Sciences practice and founded a software company that was acquired by a Microsoft/ Pfizer joint venture.
I don't have any information about InstaMed's financial performance. It describes itself as a healthcare payments network connecting providers, payers and patients, and says it serves over 200,000 providers nationally with tens of billions of dollars in healthcare payments processed.


Speaking of Osage, they have raised $47 million for what appears to be a new private equity fund, Osage Venture Partners III, LP.


UPenn-related MentorTech Ventures has raised $10.75 million towards a $40 million offering for a new fund, MentorTech Ventures III L.P., according to an SEC filing. Though not large, MentorTech, managed by Michael B. Aronson and Boris Kalandar, takes small, usually early stage stakes in Penn-associated ventures; major successes have included Diaper.com (sold to Amazon), PayQuik (sold to Citi), Yodle, and Neat Company. With all of the entrepreneurial activity going on within Penn/Wharton, it should have plenty of opportunities ahead.


Penn Mezzanine LP of Wayne has raised $34.2 million in an offering, according to an SEC filing. Its not clear whether this is related to or completely separate from Safefuard Scientifics' announced acquisition of a 36% interest in Penn Mezzanine in July.
Penn Mezzanine, which was founded in 2010, is headed by Managing Partners Donald K. Rice and Darl A. Petty. It provides mezzanine financing to middle market companies using combinations of structured equity and debt.


Square One Bank has provided a a $2.5 million credit facility to ProfitPoint, Inc., a Clifton Heights-based provider of stored value and loyalty program solutions. NewSpring Ventures was an early investor in ProfitPoint.


Oaks, PA-based asset manager and investment processor SEI Investments teamed up with Greenwich Associates on a survey of institutional investors, consultants and fund managers globally. The first report (out of three installments) from the survey indicated that Private Equity exits were way up in the 2nd quarter, and that fund allocations to that area may increase. But SEI says that many of those exits represent “low hanging fruit” and the average holding period for a portfolio company has lengthened to five years.


Silicon Valley Research Group says it has opened a practice in Philadelphia, its fourth location. Marc Pitcher, the company’s Director of Client Services, is based in Philly. He also manages the firm's New York City practice. "Philadelphia has a burgeoning technology and venture capital scene, and the presence of the University of Pennsylvania, Drexel, Temple and other highly respected centers of innovation make the city a natural fit for our company”, Pitcher said in a statement.



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