News – Another Venture Milestone Reached

Hoping to take advantage of a relatively unpopulated early-stage niche within the crowded Silicon Alley venture capital space, recently formed Milestone Venture Partners LLC has gone right to work marketing its $25 million fund.

The new vehicle will focus on Series A financing for commercial b-to-b Internet companies. It will also invest in the infrastructure and enabling software firms that allow the Web-based b-to-b market to be both possible and profitable.

“This is a very exciting time for these companies in the New York metro area right now,” said Edwin Goodman, founder of Milestone Venture Partners. “The problem, though, is that the average venture capital fund has around $220 million of capital and, in order to generate an attractive return, they must make investments from $5 [million] to $10 million… and a lot of early-stage start-ups are not efficient targets for that type of money.”

It is this perceived funding gap between angels and institutions that has driven down the overall amount of the new fund to $25 million with a cap of $75 million. “We just don’t think that this low-to-the-ground strategy would be successful if we took in more than $75 million,” Goodman said.

Milestone will invest between $1.5 million and $2 million in firms that generally have pre-money valuations of between $1 million to $7 million. Examples of such companies can be seen in the existing portfolio of Calpernia Capital Partners, a fund previously created by the Milestone partners in order to help bring the new venture added credibility. Some of Calpernia’s success stories include CarParts.com and PlusFunds.com.

In keeping with its stated mission, Milestone will consider latter round investments on a case-by-case basis, although Goodman did mention that he expects to make a handful of investments in existing Calpernia portfolio companies.

“Beyond the Series A it all depends on the situation,” Goodman said. “If we already have a significant equity position and the Series B is oversubscribed with a lot of value-added investors trying to get in, there is not really a good reason for us to play.”

The fund will invest in companies based in a broadly defined New York metro area which includes locations like Connecticut, New Jersey, Baltimore and Virginia.