By Allan Maurer
RALEIGH, NC—River Cities Capital Funds has raised about $87 million of a planned $150 million new fund, says Ed McCarthy, managing director from the Ohio-based fund’s Raleigh office.
“Our first close in December was at $75 million, we’re at about $87 now and we’re still working on it,” he adds.
Although River Cities first two funds invested primarily in the Midwest, but from fund three it has increased investments in the Southeast.
Those include Research Triangle-based SciQuest, Virginia’s Privaris, which makes a handheld device smaller than a car key fob that identifies the user to office or computer security systems, Atlanta’s energy management company, Prenova, and Florida-based Knowlagent, a software company, and healthcare services companies in Tampa, FL, and Nashville, TN.
An attractive territory
“The Midwest and Southeast comprise about 40 per cent of the Gross National Product but only 10 percent of venture capital is invested in the two regions, which also have only about 10 percent of the venture capital under management located in their regions. “So, it’s an attractive territory,” says McCarthy.
McCarthy says River Cities prefers companies “that have engaged their markets with a product or service. We don’t do seed investing. We’re a growth stage investor. We like traditional software and business service companies.”
He notes that River Cities has already made four investments in software-as-a-service (SaaS) companies, some before anyone called the sector that. “They’re a combination of two things we like, software and business services,” he says. “We’ve already exited two of those companies successfully.”
McCarthy says the venture capital market is “pretty good” right now. “The statistics have been steady and growing somewhat. Steady is better than the hyper bubble seen in 2000 and 2001, he notes. “At the end of 2000 there were 1,051 venture capital funds nationally. By the end of 2006, there were that dropped to 670 or so. There was a natural shakeout.
“About $27 billion was raised by VCs in 2006, but if you peel that back, over $5 billion of it was raised by two funds, Oak and NEA. We’re not competing with them. They have to invest much larger sums.”
McCarthy says “The exit markets have been favorable over the last 12 months. We’ve had six positive exits. That’s helping to provide some support to the venture market generally. When you’re able to get successful exits, it lends credence to new activity.”
Nevertheless, he cautions, “I’m not sure that will continue after another six or seven months, although it might.”
For more information see: http://www.rccf.com/
Southeast Venture Conference, February 29 – March 1, 2012 at the Ritz Carlton in Tysons Corner, VA – Where Smart Money Meets Smart People.
www.seventure.org
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