WAYNE, Pa. – EnerTech Capital Partners held a final close on July 31 on its second fund, the $234 million EnerTech Capital Partners II LP, said Vice President James Biddle.
The firm’s IRR of more than 100% on its first fund and its vertical strategy of investing in energy, utility and telecommunications companies can be attributed to why Fund II far exceeded its initial target of $75 million, set when the fund launched in the early fall of 1999, Biddle said.
EnerTech focuses on energy-related technologies, e-commerce applications, telecommunications infrastructure, software and services. The fund will back between 25 and 30 companies, mainly in the U.S., with average initial investments of $5 million to $6 million, Biddle said. At press time, the new fund had invested $20 million in five companies, he said.
The firm’s previous vehicle, the $50 million EnerTech Capital Partners LP, which closed in 1996, is completely committed to 14 companies, Biddle said. The fund focused heavily on energy and utility-related companies, leaving room for only two telecom investments. The firm plans on dedicating between one-fourth to one-third of Fund II to telecom, he said.
With the new fund, almost seven times larger than the first vehicle, EnerTech will have an opportunity to make more significant investments in each portfolio company, as well as participate in later stages of financing, Biddle said. The new fund will be a balanced blend of early- and late-stage investments, he said.
The firm’s limited partners are mainly strategic investors – 16 utility and energy companies and nine financial institutions – including Safeguard Scientifics, Conectiv, VerticalNet Inc., PackWest Telecom Inc., Capstone Turbine Corp., Essential.com, SageMaker Inc., PECO Energy Corp., Dynegy Inc., Internet Capital Group, Bank of America and CIBC.
Investing with EnerTech allows strategic investors to keep a window on technology developments in the market, Biddle said, adding that the relationship creates co-investment opportunities for the investors. On the flip side, he said, strategic investors help EnerTech by expanding its domain expertise and assisting with due diligence. “It’s a good two-way street between both parties,” he said.
The firm retains an 80%/20% carried interest split and a 2% management fee, Biddle said.
Managing Directors David Lincoln, Scott Ungerer and William Kingsley; Venture Partner David Kelly and Biddle, invest the fund along with two principals. The firm is in the market to hire four additional principals, Biddle said.