Technically Philly Interviews David Reuter For Friday Q&A

May 14, 2010

Friday Q&A: David Reuter of LLR Partners

LLR Partners is likely the largest private equity firm in the area that you’ve never heard of.

While the firm, located in the Cira Center, is one of the more active investors in the region, it has companies in its portfolio that go beyond the traditional information technology and Internet startups that we are used to hearing in conjunction with the private equity firms that TP covers in our Venture Capital roundup.

The firm has invested in retail stores like Five Below and software companies like CyberShift, mostly staying local with its money; all $1.5 billion of it.

We sat down with partner David Reuter (who is also behind UrbanBlazers) to ask him to take us behind the scenes of one of the region’s largest and most active investors.

As always edited for length and clarity.

Can you give us an overview of LLR? What sets you apart?

We started 11 years ago, and we entered the market to provide middle market growth capital in the region. Since that time, we’ve raised $1.5 billion, invested in about 50 companies and we have about 20 people here.

We think we’ve built ourselves into of the largest and most active investors in the region. We look for business with revenue $10 million to $200 million and have a capital need. We usually provide capital in between $15 million to $75 million to help those businesses grow.

Our operations are divided into IT services and software, financial services, healthcare outsource business services.

What is your exact role?

I’m one of the partners, I primarily work with software and IT services companies. There are six other partners, each is focused on an industry group. We spend most of our time looking for new opportunities and evaluating business that we find interesting.

How many of those companies are local?

About 80 percent is invested within a couple hours of Philadelphia.

Any companies you think TP readers would know?

It’s tough because most of our business are on the business-to-business side. Take SDI Health, they are a large technology service providers into pharmaceutical companies, they organize healthcare information. We have another business called Maxwell Systems that sells services for construction companies.

We also invested in Five Below, a pretty hot retailer.

You’ve been in the area since the 90s and saw the first dotcom bubble. What would you say is different about then and now?

I would say that the mid-to-late nineties were when the whole world was chasing the Internet and there were a lot of exaggerated expectations for what the Internet was going to do. I think the bubble got created and burst with everyone throwing money at stuff, no one really stopping and thinking how these business evolve.

As for today, I don’t see a singular bubble or focus. Now the Internet is one channel of many channels to do business. I don’t expect that we’re going to have the same up and down, I think were in a much more stable environment

What do you think the city can do to better attract the types of companies you invest in?

Ugh, you don’t want to go there.

I feel like its come a long way, but I still think there’s a number of impediments that exist. I think the city could better implement college graduates. The city should find ways to make it more interesting for people to do work here. Whether it’s entertainment or housing or stimulating job creation to get people involved when they come out of college.

The city wage tax is a huge impediment. Even though Philly has a cheaper cost of living, there’s a mental barrier when you have to pay four or five percent off the top to the city. I don’t think that’s welcoming to the people coming to the city. I think [getting rid of the tax] would change the interest level for people working in the tech labor force and help our city become more competitive.

It starts with talent and capital.

What is one investment you are specifically proud of?

Well, we’re proud of most of them. They are strong companies that perform well. We’ve sold business to Accenture, IBM. There have been very successful exits, however we’re not able to talk about exits.