Two Mass.-Based Become One

Working toward the same goal usually pays off and the Worcester Capital Partners Fund and Long River Capital Management are hoping for such combined success. The two have merged and will take the name Worcester Capital Management – the name of Worcester Capital Partners Fund’s original management firm. Both firms managed $15 million, first-time regional funds based in central and western Massachusetts respectively. Additionally, both were affiliates of Village Ventures, a group based in North Adams, Mass., that gives capital to businesses in mid-sized cities underserved by larger venture funds. Village Ventures put $5 million into the Worcester Fund when it was founded in January 2001, but decided it made more sense for Long River, also founded in 2001, and the Worcester Fund to team up.

Not only will the funds be invested side-by-side, but the management team has also been combined. As a result of the merger, John Merrill, founder and a general partner with the Worcester Capital Management will remain active with the fund as a member of the investment committee, but will no longer be part of the day-to-day management. Long River Capital Management was managed by Tripp Peake and Will Cowen. Together they will co-manage to new firm. Peake is the former founding president of Mass Ventures Corp. and was named managing partner of Long River Ventures in June 2000.

Cowen, a long time health care investor and co-founder of Navimedix, a Boston-based health care IT company, has moved his primary office to Worcester and is already actively looking at local and regional opportunities. The funds haven’t made any new investments and were both about 30% invested prior to the merger.

“Village Ventures originally got the ball rolling. The Worcester fund was setup to focus on IT, but it turns out that one of the richest sources of deal flow in central Mass. is in the health care sector,” says Cowen. “And Long River’s management team really brings biotech expertise to the region. Worcester realized they really needed to add health care, so it seemed to make sense to combine the two.”

Keeping an early-stage focus, the funds are expected to be equally invested in health care, IT and telecommunications deals. Additionally, two thirds of the capital will be put to work in central and western Massachusetts, while the remaining one third will be invested in the greater New England area. The funds will invest $500,000 to $5 million into each portfolio company and are expected to be fully invested in three years.

“IT will come back, but it hasn’t been strong in Worcester and there is an awful lot of health care there. When you have regional funds you have to have a broad investment focus in order to meet IRR objectives,” says Cowen. “Worcester has the Mass Biomedical Initiative and the Biotech Park, which makes health care more attractive now.”

The new firm’s LPs include FirstMass. Bank, Fleet Development Ventures LLC, Sovereign Bank New England, WPI, the College of the Holy Cross, Clark University, The Massachusetts Property and Casualty Insurance Company Community and Economic Development Initiative.

Going forward, the new firm will take on a completely different name and Cowen expects to raise another fund after these two are committed. “We will most likely raise another fund,” he says. “Valuations have returned to normal so it’s time to get back to good ole’ fashion investing. That’s what this is all about.”

Email Danielle Fugazy