ANN ARBOR, Mich. – Emerging from humble beginnings as a small regional seed fund, Enterprise Development Fund is joining the big leagues with the launch of its much larger $75 million-targeted third effort.
More than 10 times the size of Enterprise’s inaugural fund, Enterprise Development Fund III will be raised primarily, but not exclusively, from Michigan-based pension funds, banks, corporations, universities, foundations and individual investors.
“We’ve had a fair amount of interest in it,” said Hayden Harris, a general partner of the firm, noting that many limited partners from Fund II were returning for the latest effort. “They liked what we did in our second fund.”
Enterprise Development, launched in 1987 as a $7 million vehicle, focused on information technology and health-care deals in the Great Lakes and Upper Midwest. The firm began raising its third effort in June as its $26 million second fund wound down. Fund II, which has 16 portfolio companies, wrapped in 1996 and has room for one or two new deals. Its portfolio includes Tualatin, Ore.-based fabless semiconductor manufacturer Pixelworks Inc., in which Entreprise co-invested with Sequoia Capital and Battery Ventures, and GenVec, Inc., a developer of gene therapy for the treatment of cancer, cardiovascular and lung diseases.
Enterprise III will back about 20 deals, and with the additional capital, the firm will participate in more rounds of financing than in the past. Deals will range between $1.5 million and $5 million each.
The Midwest has started to attract more capital in recent months, including InvestCare Partners, a health-care focused vehicle launched by the Farmington Hills, Mich.-based investment firm GMA Capital (VCJ, April, page 20), and technology-oriented Open Prairie Ventures in Champaign, Ill. (VCJ, April, page 24). There is plenty of room for competition, however, Mr. Harris said.
“A lot of the funds that have been formed in the last year or so are later stage than us,” he explained. Moreover, the Midwest is “fertile ground” for investments, with better valuations and less competition than VCs face on the East and West Coast, he added.
Mr. Harris, and fellow General Partners Mary Campbell and Tom Porter manage Enterprise Development Fund.