MCLEAN, Va. – Blue Water Capital in March launched its third fund, the $150 million-targeted Blue Water Venture Fund III LLC, which expects to hold a first close in April, said Reid Miles, a founder and managing director at the firm.
The vehicle will back expansion-stage information technology companies focusing on the software, telecommunications, multimedia, content and e-commerce sectors. Depending of the fund’s size, it will back between eight and 12 companies in the Eastern United States focusing on companies in the Mid-Atlantic region, Miles said.
Initial investments will range between $3 million and $7.5 million, and reach as high as $5 million to $12 million over several rounds of financing. No more than 15% of the fund will go toward any one company, Miles said. The firm is almost always a lead investor, and it usually co-invests with other venture firms, as well as with its own limited partners, he said.
Blue Water’s portfolio includes competitive local exchange carrier Net2000 Communications Inc., which went public in March, and OneSoft Corp., an application service provider, which filed to go public in January.
The $51 million Blue Water Venture Fund II closed in July 1999 and is completely invested in six companies. The firm’s inaugural fund, the $25 million Blue Water Strategic Fund I, which closed in July 1997, is also fully invested in eight companies.
Existing limited partners, such as Keyport Life Insurance Co. of Boston, Societe Generale, PNC Bank Corp., Summitt Bank and First Union Corp., invested in Fund III, in addition to wealthy families and high-net-worth individuals. The firm’s partners planned to meet with potential new investors in April. Blue Water retains a 2.5% management fee and an 80%/20% carried interest structure.
Founded in 1996, the firm is run by founders and managing directors Henry Barratt, Kim Cooke and Miles, as well as Managing Director and Chief Financial Officer Wilbur Priester. Blue Water plans to hire two additional associates to join two existing associates, Kathleen Millier and David Plimpton, to help invest Fund III.