PITTSBURGH – Birchmere Investments Inc. recently unveiled an incubator and launched the $75 million-targeted Birchmere Ventures II LP, which will focus on early-stage information technology companies in the Mid-Atlantic region and Western Pennsylvania.
The vehicle expects to back about 30 Internet companies, specifically those focusing on e-business infrastructure, Internet infomediaries, e-services, enterprise software, telecommunications and bio-informatics software spaces, said Ned Renzi, a partner in the new fund.
Birchmere intends to be a lead investor in most of its local early-stage deals, but will also invest in expansion- to late-stage deals on a national level, Renzi said. The $20 million Birchmere Ventures I LP, launched in 1996, had backed some 17 companies.
At the same time, Birchmere has created a separate incubator to provide support services and seed capital annually to about a half dozen early-stage companies, with initial investments around $500,000. The facility, staffed with a chief executive officer, a financial officer, a marketing professional and a technology expert, will work with the companies until they have reached the maturity level of other enterprises in the firm’s main portfolio, and then possibly invest in them again. The firm is searching for an office for the accelerator facility and expects its operations to be functional by the fourth quarter of this year, Renzi said.
Renzi and two of the firms other partners, Sean Sebastian and Gary Glausser, will invest Fund II. Prior to launching the vehicle, Renzi and Glausser had been general partners at Pittsburgh-based CEO Venture Fund, investing its $40 million CEO Venture Fund III, which is almost completely committed to 14 early-stage companies.
All of Birchmere’s original three partners, except Sebastian, left the firm just before fund raising started for Birchmere II, when Sebastian joined Glausser and Renzi. The new partnership decided to keep the Birchmere name to leverage the firm’s business connections and its portfolio companies, such as FreeMarkets Inc., which went public in December 1999.
Limited partners in the new fund will include an array of institutional investors including pension funds, fund-of-funds and endowments, some of which previously invested with Renzi and Glausser. Additionally, Richard Simmons, a manufacturing executive who was the sole limited partner in Birchmere Ventures I, has committed at least $10 million to Fund II. The firm retains a standard management fee of 2.5% and a 80%/20% carried interest split.
Birchmere regularly meets with a technical advisory board made up entrepreneurs who review business plans, conduct due diligence and take active roles on the boards of the firm’s portfolio companies.