A downtown venture capital firm has just capped off a $120 million fund, while a Southside private equity firm has made a new bet on the realm of construction.
Harbert Growth Partners, the Richmond-based venture capital arm of Harbert Management Corp., headquartered in Alabama, recently completed its fourth VC fund since 2004.
Dubbed Harbert Growth Partners IV, the fund is the company’s largest to date. Its previous fund raised approximately $78 million.
Managing partner Wayne Hunter said about half of the $120 million in the fourth fund has been committed to six companies.
Its most recent investment with HGP IV was in Sidecar, an e-commerce marketing company out of Philadelphia, and its first deal was in MapAnything, a mapping software company. Its roster also includes locally based Envera Health, which offers scheduling and referral services to health systems and raised $14 million in a capital raise last year, led by HGP.
Hunter said HGP typically targets “emerging growth companies” with revenue of $5 million to $20 million that are “growing really fast.”
“They need our capital to continue to expand and grow,” Hunter said. “We’re somewhere between an early-stage venture capital fund and a larger, later-stage private equity fund.”
The firm to date has invested in 40 companies, focused primarily on healthcare and technology. Its money stays mainly on the East Coast, keeping watch on companies from Philadelphia to Miami. It will occasionally look as far west as Texas and Colorado.
Hunter said HGP typically has a two-year courting period before making an investment.
“We tend to track companies from the time they get initial funding,” he said. “We watch them as they grow and try to figure out which ones will be the most attractive.”
Hunter said the firm looks to exit investments, on average, after four to six years. He said HGP has exited most of the investments from its first two funds and still holds several from its third fund.
The company lists 24 active investments on its website, including locally based men’s clothing brand Ledbury and pharmaceutical firm Kaleo.
One of its most successful recent exits was in the sale of Georgia-based software company Wellcentive to Dutch conglomerate Royal Philips.
“We don’t like to get specific, but that was a really attractive return,” Hunter said.
Up next, Hunter said, it will likely begin raising its fifth fund in 18-24 months.
While Harbert eyes its next investments, local private equity firm Blue Heron Capital last week made its latest deal, putting about $3.4 million into a company that has created a product it hopes will catch on in the construction industry.
Blue Heron invested in Starc Systems, a Maine-based company that sells a modular, reusable barrier system for dirt, dust and debris on construction jobs involving venues that remain open during renovations.
Tom Benedetti, co-founder of Blue Heron, said the product was created by Starc Systems founder Tim Hebert, who wanted an airtight, sound-deadening alternative to the traditional plastic sheeting and tape for his construction company that was doing work at hospitals.
“Right now drywall and plastic tarps are the traditional choices for contractors,” Benedetti said, comparing the walls to a dry-erase board. “Tim noticed there’s a huge pain point and solved his own problem.”
The Starc investment is the sixth deal from Blue Heron’s Capital Fund I, which finished raising $25.5 million in 2013. That pool also includes an additional $8 million to $10 million in matching funds from its investors.
Starc already is selling outside its home markets in the Northeast, including in Richmond to W.E. Bowman Construction.
The funds will be used to hire sales and marketing staff, to hit what Benedetti sees as a larger market beyond hospitals, including data centers, hotels and office buildings.
“Our job will be to get the word out and accelerate that,” he said.
Benedetti, who founded Blue Heron in Richmond in 2010 with Andrew Tichenor, said the firm targets businesses with $2 million to $20 million in revenue that have an established customer base, a working product and an established management team. It focuses mostly on healthcare, IT and services companies.
“The trick to this business is you have to find deals that fit your model, but also not get caught up in a bidding war where you overpay,” Benedetti said.
The firm’s model includes bringing on investors that mostly have built and sold businesses, or have been C-suite executives. With each of its deals, Blue Heron typically takes a board seat within the company and has at least one of its investors directly assist management.
Mark Hourigan, head of local construction company Hourigan Construction, is an advisor on the Starc deal, Benedetti said.
Benedetti said Blue Heron has room for one more investment with this latest fund and then will go out to raise another round.