Piedmont Ventures Looks for $50M

Piedmont Venture Partners recently launched its third fund with a target capitalization of $50 million. The vehicle is expected to hold a first close sometime this summer.

Piedmont III will back early-stage companies in the information technology and life sciences sectors, said Stacy Anderson, a managing principal with the firm.

Roughly 85% of the fund’s capital will be invested in IT businesses, with the remaining 15% going to life sciences companies, she added. Average deal size is expected to fall between $3 million and $5 million.

Piedmont’s latest vehicle marks a step up in size from its previous venture endeavours. The $19 million Piedmont I, which closed in 1997, backed 13 companies with an average deal size of $1.5 million and the $26 million Piedmont II, which closed in November 1999, backed 13 deals with an average deal size of $2 million.

Piedmont will continue to focus on companies in the Southeastern U.S., but will reserve approximately 30% of Fund III’s capital to invest in other geographic regions.

“Since we are at Fund III now, we have a long list of co-investors we’ve already worked with,” Anderson said. “Combine this with an initial public offering window that seems to be far away, and I think we will have the chance to invest outside of our area.”.

Piedmont generally prefers to be a lead investor, although Anderson did say that the firm will not lead deals for companies in other parts of the country.

“That would defeat the purpose of being a regional fund, which can take advantage of having dollars on the ground in a specific part of the country,” she noted.

Due to the frenzied pace that has dominated the venture capital market recently, Piedmont had not reserved capital in its previous funds for follow-on rounds of financing.

As a result, the firm will also use the new fund to do follow-on rounds in some of their existing portfolio companies. “This is not a bailout fund or a follow-on fund, but we are reserving the right to be opportunistic,” Anderson said.

Anderson added that the firm retained an 80%/20% carried interest structure and a 2.5% management fee.

While she declined to reveal potential limited partners for the new vehicle, LPs in the firm’s previous two funds included: Bank of America, Citigroup Inc., First Union Corp., Duke University, Duke Energy and United Dominion Industries Inc.

Chris Lyford is expected to join Piedmont as its chief financial officer on June 15. In addition, Anderson said that the firm is actively looking to add another partner.