May 23–A venture capitalist, an entrepreneur and a seasoned investment manager have partnered to launch a $125 million investment fund in Austin.
Blue Sage Capital is the first fund created in Austin in at least two years, said Kirk Walden, director of venture capital research for PricewaterhouseCoopers accounting firm.
The fund is headed by Peter Huff, a former partner at Austin Ventures; Jim McBride, who is leaving his role as manager of the LBJ Holding Co.; and Bo Baskin, former chief executive of Baskin Family Camps Inc., which owns and operates summer camps and corporate conference centers in Texas and Colorado.
“We’re generalists — we’ve invested in everything from running-shoe companies to education companies to technology services,” said Huff, 33, who came to Austin Ventures three years ago from Whitney and Co., a New York-based venture firm.
Blue Sage plans to invest in established companies in Texas and the Southwest, targeting profitable companies with annual revenue of $5 million to $100 million.
It plans to make 15 to 20 investments of $5 million to $15 million during the next five years. About half the deals will be buyouts. The other half will provide growth capital.
A typical Blue Sage deal would involve a self-financed company whose owners are looking for money to expand or are ready to cash out.
“We’re seeking companies with existing customers and existing cash flow,” Huff said.
“We won’t take risks on unproven concepts. When we step in, the widget already works.”
A private-equity fund differs from a venture capital fund in its approach. Venture capitalists usually back young unproven companies. Private-equity firms seek proven companies that need money to grow.
“You hear people on the street talk like this kind of funding doesn’t even exist anymore,” said Kirk Walden, director of venture capital research for PricewaterhouseCoopers.
“This is proof that in Austin it’s not going away.”
But Blue Sage is likely to encounter plenty of venture firms because in a weak economy, many of them are shying away from startups in favor of more mature companies.
“That’s where venture capitalists want to be: in deals where the companies are near profitability and have momentum and less risk,” said Gene Lowenthal, a partner with the Austin office of Growth Capital Partners, a Houston-based investment bank. “It’s a difficult time to be an early stage company.”
Blue Sage raised money from institutional investors, including state pension funds, family endowments and large financial organizations. Blue Sage, which initially planned to raise $100 million, expects additional commitments will push the fund to $150 million.
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