NEW YORK – Hudson Ventures is aiming for a late-November close on its $130 million-targeted sophomore effort, Hudson Venture Partners II LP, said Larry Howard, senior managing director. The vehicle is in the process of becoming a Small Business Investment Company and should receive approximately $88 million in two-to-one leverage from the Small Business Administration to go with the $44 million in private capital the firm intends to raise from its limited partners, he added. Hudson Ventures anticipated receiving its SBIC license at some point on or around Nov. 15, he said. The firm informally kicked off fund raising for the vehicle in early October, he added.
The vehicle will back approximately 35 technology, infrastructure, computer services, health-care and biotech companies with an average initial investment of $3 million, Howard said. The firm will keep about $40 million to $50 million of the fund’s capital in reserve to make follow-on investments, he added.
“The strength of the firm is technology,” Howard said, noting 60% to 70% of the fund will go toward backing technology deals. The firm will avoid any business-to-consumer Internet plays.
“We don’t think we are good partners for b-to-c companies; we want to understand the product and know where the revenues are coming from,” he said. The remainder of the vehicle will be invested in health-care and biotech deals as well as some other one-off opportunities.
Hudson Ventures will invest the fund in early- to middle-stage companies, Howard said. The firm likes its portfolio companies to be located in the New York region he said, adding the firm invests from Boston to Washington D.C.; however, Hudson Ventures will go outside of this corridor for special situations, he noted.
The vehicle has not done any deals to date, Howard said.
“We have a host of deals lined up,” he added, noting “right now the marketplace is very conducive to venture capital. We are seeing better quality deals at better prices.”
The vehicle has encountered no obstacles in the fund-raising market, Howard said, with almost all of the LP’s from the firm’s first vehicle returning for Fund II. He attributed this to Hudson Venture’s “roughly 100%” IRR for Fund I. Howard declined to identify any of Hudson’s LP’s, beyond saying the firm had a strong and interesting investor base.
“We have several institutions and individuals from telecommunications, banking, real estate – a host of people who can be really helpful,” he added.
Howard declined to disclose the vehicle’s carried interest structure and management fee. He also declined to reveal how much Hudson Ventures itself had invested in the fund.