Longworth aims for $180M with new fund

Following a string of exits in recent years, 9-year-old Longworth Venture Partners is raising its third fund, according to a regulatory filing that lists the fund’s target at $180 million.

The Waltham, Mass.-based firm raised $120 million for its previous fund in 2003 and $20.5 million for its first fund in 1999.

Partner Jim Savage, who co-founded Longworth after leaving his job as general manager of ZDNet, declined to comment on the firm’s fund-raising efforts. However, he said that Longworth’s second fund is “almost fully committed, notwithstanding reserves for follow-on investments.”

That Longworth has apparently set its sights on a substantially larger fund than it did five years ago isn’t surprising, considering the amount of liquidity it has experienced in its relatively young life.

Its first fund invested in Constant Contact, a Waltham, Mass.-based company that sells direct marketing email software, and which raised $107.2 million in proceeds from an IPO in fall 2007. Longworth owned 9.8% of the company prior to its public offering, and Savage says that its investment resulted in a “10x” return for the company.

In 1999, Longworth also invested in Boston-based Softricity, a virtualization company that was acquired in 2006 by Microsoft for an undisclosed amount. Savage says that Longworth’s debut fund has “returned well more than all the committed capital to our LPs; it’s a top-quartile or better fund, driven on the strength of those companies.”

The firm’s second fund has had three portfolio companies undergo an exit. In 2004, chipmaker Broadcom acquired RAIDCore, a startup that had come out of stealth mode just months earlier with cheap, high-performance RAID controllers and virtualization software. The Nashua, N.H.-based startup had raised just $1 million from Longworth and Egan-Managed Capital, according to Thomson Reuters (publisher of PE Week).

Longworth-backed Thor Technologies, a New York-based enterprise software startup that raised about $59 million in total funding from Longworth, Pequot Capital Management, Trident Capital and other investors, was bought by Oracle in 2005. Last year, Microsoft gobbled up Chicago-based instant messaging provider Parlano. The company had raised $22.3 million from Longworth, Golden Gate Capital and Oak Investment Partners.

The acquisition prices of RAIDCore, Thor Technologies, and Parlano were not disclosed, but Savage suggested that the transaction amounts were substantial.

“Our goal for each of our funds is to do 3x or better on committed capital, and all the exits [in our first and second funds] support that,” he said.

Longworth invests in early stage Internet and software deals on the East Coast, such as Tizor Systems and Scrapblog. Tizor Systems, a Maynard, Mass.-based enterprise software company, has raised $26.6 from Longworth, Hummer Winblad Venture Partners and numerous others. Longworth led its most recent, Series C, funding last November.

Scrapblog is a Miami-based online service company that invites users to create and share multimedia scrapbooks. After raising an undisclosed amount of Series A-1 funding, Scrapblog raised an additional $7.5 million from Longworth and Steamboat Ventures.

Savage, who noted that the firm typically invests $3 million to $10 million over the life of an investment, said he would “expect the same group of partners” to continue at Longworth when it does raise its next fund. In addition to Savage, Longworth’s investors include co-founder and Partner Paul Margolis, who co-founded enterprise resource planning company Marcam Corp.

The management team also includes Partners Peter Roberts and Nilanjana Bhowmik, who both joined the firm when it raised its second fund. Roberts came over from BancBoston Ventures, while Bhowmik was formerly a vice president at the investment bank Jefferies Broadview.

Savage added that Longworth is “actively hiring a group of analysts to expand our team.”