ANN ARBOR, Mich. – EDF Ventures, formerly the Enterprise Development Fund, in mid-June held a $82 million final close on EDF Ventures LP, said Hadyn Harris, a general partner at the firm. The vehicle, launched in June 1999 with a $75 million target, received about $50 million in two-to-one leverage from the Small Business Administration, he added. The fund held a first close on $20 million in December 1999 (VCJ, February, page 23).
Harris said the firm’s name change does not indicate a switch in strategy. It is just an attempt to clear up a little confusion surrounding the firm’s mission. “We changed the name, because people thought we were some kind of government agency and not a VC firm,” he said.
The new fund will focus on early-stage health-care, technology and Internet-related business-to-business deals, Harris said. “We are pretty much technically focused,” he added. He said the fund would avoid business-to-consumer Internet plays and is wary of backing health-care companies developing therapeutic products because of the length of time it takes for new medications to gain FDA approval.
Harris said the fund could back as many as 20 companies with an average deal size between $3 million and $6 million spread over a few rounds of financing. Typically, the fund’s initial investment should be in the $1 million to $2 million range, he added. To date, the fund has done nine deals for a total of $12 million, he noted.
The vehicle’s geographic focus will be on states in the Great Lakes region. However, Harris said the firm has made investments outside this area, including in Texas and Maryland. “We will go where the technology takes us,” he added. “We are willing to co-invest anywhere.”
Harris declined to disclose how much EDF’s general partners invested in the vehicle, beyond saying it was a fair amount. “We are pretty excited about this fund,” he said. The fund retains an industry standard 80%/20% carried interest structure and a 2.5% management fee, he added.
Limited partners in the fund include banks, pension funds, corporations and some individual investors. Harris declined to identify any of the LPs. He said the individual investors tend to be angel investors and people involved with the entrepreneurial world. “They help us evaluate deals and bring us deals,” he added.
The firm’s previous fund, the $26 million Enterprise Development Fund II, which closed in 1996, is now fully invested in 16 companies, Harris said.