CID Equity Partners has closed CID Equity Capital VIII with approximately $40 million. There are a few limited partners who have been delayed in committing to the fund until after its second close.
The fund has already made two investments and is expected to have a life of approximately four years.
CID Equity Capital VIII is targeted at late-stage and growth equity investments with some possible earlier stage biosciences deals. Investments will be focused on companies located in the Midwest, particularly around Indianapolis.
The firm now has $200 million under management and three active funds, including the new fund, a seed fund and a mezzanine fund. CID has invested in two companies from its new fund.
The firm invested in a cancer treatment technology developer based in Indiana that CID invested $3 million into including $2 million from fund VIII and $1 million from its seed fund. And CID made a follow-on investment in a portfolio company from a previous fund that allowed the firm a pro-rata investment share with “very attractive terms.”
The Indianapolis-based firm began raising the fund just before September 11, 2001 but stopped fundraising for six months following the terrorist attacks. Kevin Sheehan, managing general partner with CID Equity Partners said the members of the firm realized that their initial goal of raising between $60 million and $100 million was not going to be possible.
“So many of our investors were upside down due to allocation in the stock market,” Sheehan says. “We know a large number of major players whose equity funds had done so poorly that they had no room to invest and they made no new private equity investments.”
Sheehan also says that some of the firms’ limited partners no longer exist as a result of banking consolidation that has been particularly acute in the Midwest. Limited partners in past CID funds, according to Thomson Venture Economics, include American Electric Power Service Corp., Ball Corp., BancOne Capital Partners, Cummins Engine Co., Great American Insurance Company and the Michigan State Treasury.
While falling short of its initial goal could be viewed as another sad story of the beleaguered VC industry, Sheehan views the smaller size fund as making more sense. He says it will not affect their ability to make good investments.
“We’re comfortable with the $40 million finishing point,” says Sheehan.
He adds that the firm had done 12 investments in the past 15 months and that the investment environment is “superb” with valuations at levels nearing that of 10 to 15 years ago.
CID’s bright outlook despite its lower than initially expected fund is that the firm feels the economy is on the rebound.
“This year there is budget across the board for new technologies,” says Sheehan, who describes 2002 as a zero sum game where companies wouldn’t invest in a new technology or a fund unless an entrepreneur could abandon another.
This year, CID sees economic indicators as much better.
“No one is jumping up and down yet,” says Sheehan. “But it is a lot better.”
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