Arcapita thinks it’s time to get into the venture game.
The Atlanta-based investment bank, formerly known as Crescent Capital Investments, has been active in private equity, having participated in about $1 billion in middle-market buyouts and other private equity deals since 1997. But last week, the firm announced it has launched Arcapita Ventures and is seeking to close on a $200 million inaugural venture fund.
Arcapita Ventures will invest in later stage health care and information technology companies. And the Atlanta-based fund will mostly focus on the Southeastern United States.
Arcapita Executive Director Charlie Ogburn notes that Atlanta’s venture community is small and was stung by the Internet bubble. But, he says, venture deals are primed for growth.
“We had a huge rollover in the venture market after the bubble burst and fund-raising dried up,” Ogburn says.
The firm secured a $40 million anchor investment from its parent bank in Bahrain. The rest of its funding will come from individual and institutional investors that do business with the bank.
Arcapita recruited former Fuqua Ventures managing director John Huntz to lead the group, and Huntz will be traveling to Bahrain next month to meet with the bank’s board and work on fund-raising. Arcapita Ventures expects to raise $200 million by the first quarter of 2006.
Huntz expects to have two or three partner-level investment directors with him before the end of the year. He also says that the group will likely close its first deal before the end of the year.
Arcapita operates under the guides of “Sharia” (or Islamic) Law. This prohibits the group from investing in businesses that sell or provide things forbidden to Muslims, such as alcohol, pork, tobacco and gambling. This doesn’t affect the fee and carry structure of Arcapita Ventures, which Huntz describes as standard for the venture industry. He adds that the strictures of Islamic Law won’t limit what appeals to him as a venture capitalist.
“In my 25 years of being in the venture business, I’ve never done anything in alcohol, gambling, firearms or pork,” he says. “Most of our investments are in health care and information technology. That gives us more than enough to say grace over.”
Arcapita has offices in London and Bahrain. Its investment banking business was launched in 1997 and operates out of Atlanta and London. It specializes in middle-market buyouts, but is also active in real estate and “asset-based investments” that include water and gas utilities and a jet manufacturer.
Its portfolio of buyout companies includes Caribou Coffee and Church’s Fried Chicken.