Portfolio Profile: Saturn Asset Management –

BOSTON – For the last seven years, Saturn Asset Management has raised capital on a deal-by-deal basis. But the early-stage investor is about to join the ranks of traditional venture firms, with plans to raise its first $150 million-targeted vehicle.

Raising a fund will allow Saturn to invest more quickly and efficiently said Jeffrey McCormick, the firm’s founder and managing director. Although the time frame for the new vehicle remains unclear, potential limited partners likely will include Saturn’s current list of LPs, as well as pension funds and corporate strategic investors. Once Saturn completes its shift to raising funds, it likely will cease raising capital on a deal-by-deal basis, McCormick said.

Founded in 1993, the firm backs early-stage telecommunications, health-care, e-commerce and digital media companies mainly in the Northeast, but it makes opportunistic investments throughout the country, McCormick said. Saturn seeks enterprises with an existing management team and whose technology or product is fully or largely developed.

“The common link among the companies we back is that they are a part of significantly expanding markets,” he said. “When at all possible, I would rather swim with the stream than against it.”

Saturn prefers to invest in early-stage deals because of the value it can add to a company at that stage of development. “The value we create at the early level is more significant to a company than what larger VC funds can do at a mezzanine level,” McCormick said. To that end, Saturn typically invests between $2 million to $6 million in individual deals, and on occasion has put in as much as $9 million in a company right from the start. The firm usually participates in additional rounds of financing, with total investments over several rounds reaching as high as $15 million. “We help companies grow to a level where larger players can push them forward to a public offering,” he added.

In the Beginning

Since inception, Saturn has bypassed raising individual funds, preferring to locate promising companies and raising capital on a deal-by-deal basis through its broker/dealer affiliate, Saturn Capital Inc. Once a deal was found, Saturn then turned to its LPs, a group of high-net-worth individuals, family foundations and small institutional investors, for backing.

McCormick points to portfolio company Twin Rivers Technologies Inc., a producer of fatty acids, as an example of its investment strategy. “Twin Rivers is an unusual play because of their industry – but they have a strong management team we believed in and we were able to find a group of investors who thought the same way,” he noted. McCormick declined to say how much Saturn invested in the Twin Rivers deal, though he did say the fund-raising process came together quickly.

McCormick said this approach to venture investing has its pros and cons. Investors have the option of choosing to invest in their own portfolio of deals, but they must also back a number of companies to have a well diversified portfolio. “Clearly a fund gives you the ability to do things in a tighter fashion,” he said. “But I do not think our process has been much delayed in terms of time, if at all.”

McCormick, who worked at the Boston-based Bariston Associates has a background in the private equity financing of telecommunication companies and was trained as a molecular geneticist. He decided to make the leap to venture capital because of what he perceived as a void of investments in earlier stage companies in the early 1990s.

Saturn has 10 investment professionals and maintains a network of 20 advisers, like Louis Barnett, who holds a doctorate in science and has experience in the chemicals industry, to provide the firm with insight into specific industries and market sectors. The firm sources its own deals and also receives a large number of referrals from its investors. “The first thing an entrepreneur with an idea does is talk with someone who has money,” he said. “Then our investors will call us and put us in a good position to see and to evaluate a number of these opportunities before they are really out there and well known.”

Saturn has to date invested approximately $100 million, which currently has a value of about $3 billion, McCormick said.

Saturn Asset Management is located at 75 Federal Street, Boston, Mass. 02110.

(617) 574-3330 fax: 617-574-3331.