Penn. commits $29.5M to local VCs: Program aims to boost in-state startups.

Pennsylvania Governor Edward Rendell announced last week a $60 million state initiative to invest in venture funds based in the state. Rendell says that the initiative, the New PA Venture Capital Investment Fund, will foster economic development and boost the growth of in-state technology companies.

The program will give loans to firms that are looking to make investments in Pennsylvania-based businesses. Firms that receive funding from the program are required to raise $3 from other limited partners for every $1 received from the state fund.

And don’t expect the bulk of the funds to go to major cities, says Rebecca Bagley, deputy secretary of Pennsylvania’s Technology Investment Office. She says that the state wants to spur more economic development in overlooked parts of the state outside the typical technology epicenters of Pittsburgh and Philadelphia. The venture program must allocate half of its funds to firms located outside of these areas, she says.

Thus far, Pennsylvania’s Commonwealth Financing Authority (CFA), which receives recommendations from the program’s internal staff on what VC funds to disperse capital to, has approved commitments to seven firms.

* Blue Hill Partners, a Philadelphia-based VC firm, received a commitment of $2.5 million from the program for Blue Hill Investment Partners. The fund will invest in renewable energy, efficient manufacturing, resource recovery, pollution control and water management companies. The firm expects to invest an average of about $1.2 million in 10 companies.

* Daedalus Management has $3 million in commitments approved by the CFA for Daedalus Partners. The Philadelphia-based firm will use the fund to invest in manufacturing companies in Philadelphia and Southeastern Pennsylvania.

* Draper Triangle Ventures, a Pittsburgh-based affiliate of Draper Fisher Jurvetson, received CFA approval for $5 million for its second fund. The fund has raised $40 million so far, according to Thomson Financial (publisher of PE Week). The fund will invest between $500,000 and $2 million in about 25 early stage companies in the IT, medical devices and technology, software, nanotechnology, education and semiconductor sectors. The firm focuses on investments in central and western Pennsylvania and Ohio region. Draper Triangle Ventures I raised $53 million in 1999.

* EnerTech Capital, a Wayne, Penn.-based firm, received $3 million in capital commitments for EnerTech Capital Partners III. The fund will raise at least $225 million to invest an average of $9 million in 25 companies. The firm invests in advanced materials, engineered products, network solutions and software companies that serve the energy industry. EnerTech Capital Partners II closed on $234 million in 1999.

* Mid-Atlantic Venture Funds, a Bethlehem, Penn.-based firm, has $7 million in commitments for Mid-Atlantic V. The fund will invest an average of $3 million in between 20 to 25 early stage technology companies in the Mid-Atlantic region. Mid-Atlantic IV closed on $111 million in 2000.

* NextStage Capital General Partners received $4 million in commitments from the program for NextStage Capital LP. NextStage is an affiliate of NextStage Capital Management. The fund will make seed and early-stage investments in Mid-Atlantic companies with a particular focus on Pennsylvania. NextStage Capital LP will invest between $250,000 and $500,000 in about 15 portfolio companies.

* Valeo Capital Partners has $5 million in commitments for Valeo Fund I. The fund will invest in emerging growth technology companies and growth capital for existing companies based outside of Philadelphia and Pittsburgh.

In all, the seven venture funds received $29.5 million in commitments, or about half of the $60 million New PA Venture Capital Investment Fund.

Pennsylvania has other venture investment programs, such as the New PA Venture Guarantee Program. That program leverages $250 million on a dollar-for-dollar basis, up to $500 million, to guarantee venture portfolios based in Pennsylvania. The state also administers the Health Venture Account, a $60 million tobacco settlement fund leveraged to $240 million.