By Allan Maurer
RADNER, PA—Although it is based in Pennsylvania and New Jersey, NewSpring Capital invests from 10 percent to 15 percent of its $500 million under management in the Southeast, says Glenn Rieger, general partner.
NewSpring, Rieger tells TechJournal South, is actually a family of funds, NewSpring Ventures I and II among them. The second NewSpring Venture fund has exceeded its $150 million target. “We’re a regional investor, from Boston to North Carolina,” says Rieger.
He notes that 10 to 15 percent of its investment money could amount to $50 million to $60 million in Southeast companies.
Across all funds, NewSpring Capital’s investment professionals include eight partners with significant experience as private equity investors, operating managers, and industry leaders at the CEO level. The firm’s investment team has a strong track record of investing in both private and public transactions, collectively representing more than 100 years of experience investing over $1 billion.
The funds, in addition to New Spring Ventures, which provides equity capital to growth and expansion stage companies focused on business services, enabling technologies and IT, include:
New Spring Health Capital provides equity capital to healthcare companies within the life sciences, healthcare services, and medical device sectors.
NewSpring Mezzanine Capital provides mezzanine capital for expansion stage and buy out opportunities in the business services, health care, information technology, and specialty manufacturing sectors.
Rieger says that each leverages staff help with marketing, branding, analysts, and back office functions across the family of funds.
The first NewSpring Ventures fund, founded in 1999, is stage and industry agnostic. “The roots of that first fund sprang from the branches of the other funds,” Rieger says.
The firm focuses mostly on growth and expansion stage companies with $5 million to $50 million in revenue. “We want our investment dollars to help the company grow and expand, to deploy more resources in sales and marketing or the acquisition and development of new product lines. We don’t want to take on the risk of new product launches or early market adoptions.”
Rieger says NewSpring will look at anything in IT, software, telecom, the Internet, e-commerce, new enabling technologies, new materials, applied science, clean tech, and business services such as IT consulting, professional consulting, and others.
It looks for what Rieger calls the “three Ms, management, business model, and market. We have very specific goals in each. We look for markets with targeted, addressable growth of more than $500 million, a market growing faster than the GDP, and a highly fragmented market with no eBay in front of it. Fragmentation tells us there is an opportunity to pick up acquisitions over the course of time.”
In management, “We look for men and women who are not first time CEOs in most cases. We like management to have skin in the game and to know their business sectors.
“We look for a business model with high gross margins with a lot of potentially recurring revenue and a clear and visible way to see how you leverage investment capital to grow in that market. We get very analytical looking at business models.”
He says NewSpring gets “granular” in looking at business models, talking with clients and competitors. “We’re not trying to gain the first mover advantage in a new marketplace. We’re really comfortable coming into another investment where other VCs led the A and B rounds and we come in and lead the C round.”
“We come to the table with a fair bit of experience and a track record of working with those types of companies. Raising NewSpring Ventures II, we were able to show a pretty compelling track record to investors.”
They have had several “nice exits,” he points out.
Portfolio companies, among others, include:
AppTec Laboratory Services Inc., a single source provider of comprehensive GLP/GMP-compliant testing, contract research and development, and custom cGMP manufacturing services for biopharmaceuticals, medical devices, cellular therapeutics, and tissue-based products. It has offices in Atlanta, Philadelphia, and St. Paul, MN.
Bluenog Corp., headquartered in Piscataway, NJ, is a software and solutions company that provides commercial, integrated solutions built on open source Application Infrastructure Software.
CorrectNet is a leading provider of client reporting and data management solutions to Asset Management Firms.
Ecount is an electronic payments company that provides a more efficient method for businesses to pay individuals (consumers and employees), and for individuals to get paid.
Nitric BioTherapeutics is a venture-backed biopharmaceutical company dedicated to exploring medical applications of topically applied gaseous Nitric Oxide.
NutriSystem (NASDAQ: NTRI) provides dieters with a simple, effective and convenient weight loss program.
RealTIME Media, Inc. is a leading provider of customer relationship marketing and promotion services in the digital space.
Now public Nutrisystems was the company’s “single biggest success” to date, Rieger says.
“We seldom go into an investment thinking the exit is going to be an IPO,” he notes. “I believe as we build out our portfolio, 80 percent or more will be strategic sales of some sort. Build good companies that are profitable and someone is going to find them interesting at some point.”
For that matter, taking companies public is not the be all and end all of exits, he adds. “You’re locked up for six months,” he says. “With a sale, you send the limited partners a check the next day.”
Rieger says NewSpring sees lots of opportunities. “We’re just swamped with good deals right now. There’s no shortage if you have the cash to invest.”
On the Web: www.newspringcapital.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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