Durham venture capital investment firm launches third fund | Pham ...

BY LAURA OLENIACZ

loleniacz@heraldsun.com; 419-6636

DURHAM ? From an initial investment in a wireless device recycling company to a stake in a brand of natural pizza products, SJF Ventures looks to make investments in growing companies that also have a positive impact.

Based in Durham, the firm started its first venture fund in 1999. The firm is now ?well on its way? toward meeting a $75 million target for a third fund that managing director Dave Kirkpatrick said will allow for new, and possibly larger, investments in companies.

The firm recently announced an initial closing of the third fund, and while SJF Ventures hasn?t reached the target total yet, the closing gives them capital to begin investing in companies, Kirkpatrick said.

?We?re best-known for being in clean technology innovation ? solar, recycling, efficiency infrastructure. We also do some tech-enhanced services as well,? said Kirkpatrick, who is a Duke University graduate and self-described former serial entrepreneur. ?With this closing, we have capital to invest in companies now from the third fund,? he added.

The lead investor in the new fund, which is called SJF Ventures III LP, is Citi Community Capital, the community development lending and investing group of Citi, according to a news release about the closing.

There were more than 45 investors in the closing, Kirkpatrick said, with investments ranging from more than $10 million from Citi Community Capital, to investments from individuals of around $250,000. Deutsche Bank was also an investor, according to the release.

The fund was licensed by the U.S. Small Business Administration as an Impact Investment Small Business Investment Company Fund, the release states, and was pegged as the first nationally-focused fund to get that designation.

The designation is part of an initiative by the administration that was launched to provide funding for high-growth companies that generate financial as well as social returns by focusing on businesses in underserved communities, or communities with barriers to capital, according to the release.

The administration has committed $1 billion to investment funds focused on investing in underserved markets or in sectors defined as ?national priorities? through the initiative, the release states. The program uses the infrastructure of the administration?s existing Small Business Investment Company program to spur the flow of private equity capital and long-term loans to small businesses.

Kirkpatrick said the firm did not get the designation in order to access federal debt.

?Our fund is a bit unique in the sense that we have the SBIC license, but we are unleveraged,? he said. ?By that I mean, we are not using any federal debt.?

Instead, the firm sought the designation because it makes it easier for banks to get regulatory approval to invest with them, Kirkpatrick said. He also believes that the rigorous certification process they had to go through also will make other investors more confident in their abilities.

That process included federal background checks, and references, he said.

?Our sense is we can do very well having market-beating returns, without using leverage,? he said.

Kirkpatrick said he expects SJF Ventures will be able to start investing from the third fund in the next two to three months.

SJF Ventures? first fund, founded in 1999, was for a total of $17 million, and was invested in 19 companies, Kirkpatrick said. The second was for $28 million, and was for 16 companies.

In total, he said the firm has seen five exits in the last year and a half ? ?that?s a pretty good record.? In total, he said they have had at least a dozen exits. They certain saw companies struggle during the recession, he said, but most bounced back.

In their 12-year history, he said they?ve had one company ?just plain go out of business? of the 34 companies they?ve invested in from the first two funds.

Kirkpatrick said that part of the firm?s model is investing in companies that can scale up without a lot of capital, he said.

According to the release, SJF Ventures looks to invest in companies with existing revenue streams of $1 million to $20 million that are seeking expansion equity capital of $1 million to $7 million.

SJF Ventures has offices in San Francisco and New York in addition to its offices in Durham, and it also has a nonprofit arm that offers services such as networking events or mentorship.

Article source: http://heraldsun.com/pages/full_story/push?article-Durham+venture+capital+investment+firm+launches+third+fund%20&id=17861763

Source: http://phamcapital.com/?p=520

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