Rustic Canyon out for more

Rustic Canyon Partners has raised $185 million from three investors for a $350 million targeted fund, according to a regulatory filing. The third fund is slated to be smaller than the firm’s $550 million first fund, but larger than its $180 million SBIC-backed fund that it raised in 2003.

Investors in fund III include Allegro Associates, NT Associates and TMCT II. TMCT II was formed in 1999 as a result of a transaction between Times Mirror, now a subsidiary of the Tribune Co., and one of its largest shareholders, Chandler Trust No. 2. Rustic Canyon Managing Partner Tom Unterman was formerly the CFO at Times Mirror.

Santa Monica, Calif.-based Rustic Canyon has invested in nine startups this year, with a focus on mobile applications and cleantech, according to Thomson Financial (publisher of PE Week). It backed communications monitoring company HyperQuality in a $8.75 million round; energy company U.S. Renewables Group in a $147,000 round; and advertising company Mobileplay in a $500,000 bridge loan in January.

Rustic also backed Spanish-language newspaper company Meximerica Media in a $1 million round in February; optical company Capella Intelligent Subsystems in a $14 million round; and IT services company PC On Call with a $70,000 bridge loan in March. It backed mobile phone services company LimeLife in a $3.9 million round; eco-friendly company Serious Materials with a bridge loan of undisclosed value; and fuel injection technology company Transonic Combustion with an undisclosed investment in May.

Rustic Canyon put flywheel maker Pentadyne Power Corp. in registration for a $30 million IPO on the London Stock Exchange’s Alternative Investment Market.

The firm had five sales from its portfolio in 2006, according to Thomson Financial. It sold storage area network StoneFly Networks for an undisclosed amount in February 2006; optical communications company Confluent Photonics for an undisclosed amount in March 2006; intellectual property software company PLX Systems for an undisclosed amount in June 2006; enterprise software company Intersperse for an undisclosed amount in July 2006; and training software company Element K for an undisclosed amount in August 2006.

It also took online real estate company LoopNet (Nasdaq: LOOP) public in a $72 million IPO last June. Shares in the company have increased almost 30% from its first day offering price. —Alexander Haislip