Capital Pours Into Third River Cities Fund

Cincinnati-based River Cities Capital Funds recently closed its third fund with $158 million. The firm, which also has an office in Raleigh, N.C., principally invests in the Midwest and Southeast.

;We started raising this fund in early 2001 and wound up closing in June 2002,” says Ted Robinson, a managing director at River Cities. “We had set the target at $150 million but would taken as much as $250 million. In the end, we are happy to have achieved our goal.

River Cities typically invests in first or second institutional rounds of financing. Its target markets include information technology, health care, communications and manufacturing. Fund III will probably pump an average of $2 million into five or six deals per year. When all is said and done, River Cities expect to put about $5 million into each portfolio company, with a maximum of $10 million.

;Five or six deals a year is manageable and in terms of stage we will be diversified but have a biased toward first and second rounds,” Robinson explains.

Robinson would not say who its limited partners are, however, he did say River Cities secured money from the Small Business Investment Company program while the remainder came from high-net worth and institutional investors.

Fund III will follow the path of its predecessors. Founded in 1994, Fund I was raised $45 million the same year. Fund II was raised in 1998 and closed with $94 million. Both funds are fully committed.

Thus far, Fund III has made six investments. Most recently it led a deal with $1.6 million in Construction Software Technologies, a Web site for the construction industry. Prior to that, River Cities invested $1.5 million into Rubicon Technology. In September 2001 River Cities made its first investment. It put $2 million in Smart Signal, a company that monitors the condition of products that have maintenance requirements like a jet engine. In October 2001, the firm invested $1.5 million into Evault, an online data back up service and $2 million into CrossMedia, a Web-based marketing services. Then in November 2001, the firm invested $1.5 million into Afterbot Inc., a developer of point of sale solutions that allows retailers to generate digital receipts.

Contact Danielle Fugazy

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