Welcome To New Jersey, Where Investment Is Returning To The Surface

Let’s be honest, many things come to mind when we think about New Jersey, before we think of tech (and I’m allowed to say this because I’m from there). But after seeing activity from two in-state funds this week, we decided to delve a little deeper and explore what’s happening in the Garden State’s startup scene.

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Let’s begin with two venture capital firms, Edison Partners and Newark Venture Partners, that announced this week they’re putting fresh capital into Jersey startups.

First, Edison Partners: the Princeton growth equity firm has been around for almost 33 years and managed about $1.6 billion in assets. It has invested in 222 companies and currently has 44 active companies.

This week, the early-stage investment firm gave $4 million to Parsippany’s Northpass, which helps companies deliver content to train their employees and customers on their brand. The firm also gave $8 million to North Bergen’s Suuchi, which is focused on modernizing supply chains for fashion brands and retailers.

Suuchi Ramesh, the founder of Suuchi, said she chose Edison over its Silicon Valley counterparts because it was a better fit long term.

“It was a mission driven decision, because of the job opportunities that we’re adding and to be able to backed by a fund in New Jersey is great with respect to logistics as well and it allows us to further contribute to the New Jersey economy,” she said in a phone call. The company has added 120 jobs to the state, and plans to add 410 more in the next three years, she said.

Currently, Edison Partners plans to focus investment all over the East Coast.

“We’re eastern United States investors,” said Kelly Ford, a partner at Edison Partners. “We won’t go to the Bay Area – or where West Coast money is going.”

In the past, the fund had satellite offices in Washington, D.C. and Boston as well as Edison New Jersey, but three years ago it consolidated to invest in a more “teamed approach.”

That strategy also works for a company like Newark Venture Partners (NVP), which told Crunchbase News that its $45 million fund just invested in nine startups, giving each $120,000 in funding. Of the new crop, only two companies are local, which Allison Williams, the director of NVP Labs, said is intentional.

“We can’t just look in our backyard, we have to look everywhere,” Williams told Crunchbase News. She wants to brand “Newark” globally. The firm recently invested in a company based in Bangalore, India. Further, of the firm’s 55 investments, 13 companies moved their headquarters to Newark after receiving investment from NVP. About ¾ of its investments also have a satellite presence in Newark, she added.

We crunched the data to identify trends of capital flow within New Jersey. Our chart below shows venture capital raised by New Jersey-based startups over time, both in dollar volume and deal size

In the last year, deal size is down about 17 percent, from 129 deals in 2017 to 107 deals in 2018. But in the same time frame, the amount of money startups received rose about 18 percent.

Those funds are going to very specific startups, Ford said.

“From our perspective, New Jersey is really undercapitalized for these venture and growth stage companies,” she said.

One factor that might influence the investment landscape: New Jersey Governor Phil Murphy proposed New Jersey Innovation Evergreen Fund (NJIEF). The fund, if passed, would bring $500 million in capital to invest in NJ startups.

“It’s a new reality that we’re in, that New Jersey was an early innovator and we kind of lost our way about it,” Williams said. Her company has hosted the governor to speak on the proposal. “(The fund) is a great way to jumpstart a region, quickly.”

On the flipside, Ramesh was unaware of the Evergreen Fund, but wasn’t bothered. To her, the investment community in her Garden state is strong.

“You read a lot of statistics, you think everything is going to be working against you,” she said. But then she got three offers in four months from all local venture capitalists – and suddenly her firm became proof that N.J. startups should remain hopeful.

Illustration: Li-Anne Dias