CLEVELAND – Primus Venture Partners Inc. is angling for a final close on its latest vehicle, the $250 million-targeted Primus Capital Fund V, sometime during the fourth-quarter, said Jonathan Dick, managing director. The vehicle was launched May 1 and held an initial close on $200 million in June, he added. The fund held a second close in July on an additional $20 million, he said.
This vehicle will focus on four different industry sectors: telecommunications, Internet/e-commerce, out-sourced business services and health care. Dick estimated that 60% to 70% of the fund’s capital will go toward investments in the telecommunications and Internet sectors, with the vehicle’s remaining capital backing health-care and business services deals. Primus doesn’t do telecom equipment deals and only invests in companies that have the potential to go public, Dick said. “This does not always happen, but that’s the goal,” he added.
Primus will invest in a promising company at any stage of its development, Dick said. However, the firm has historically gravitated toward early-stage deals. The current vehicle should back approximately 25 companies with an average size of about $10 million over the life of a deal, he said. Typically, Primus will make an initial investment of $4 million to $5 million and then participate in additional rounds of financing, Dick noted.
Primus will invest the fund nationwide, Dick said. He expects 40% of the vehicle’s deals to come from the Midwest near the firm’s office in Cleveland. “This is almost like proprietary deal flow for us because of our location,” he added. Dick estimated that Fund V will do another 40% of its deals on the East Coast, with the remaining 20% of its deal flow coming from the West Coast and Europe.
To date, Fund V has already made two investments for $10 million. Minneapolis-based LogicBay Corp. develops e-learning solutions for Fortune 1000 companies, while Cleveland-based Secant Technologies Inc. is an Internet infrastructure company that provides solutions to e-business problems. The fund has also made commitments totaling $13 million to two other deals, Dick added.
Dick said Primus’ general partners put up $4 million of the vehicle’s total capital. He declined to reveal the vehicle’s carried interest structure or management fee, beyond saying that they are both “right down the middle.” “We are not taking 25% to 30% of the carry. Our management fee is right where fund managers said it should be,” he added.
The firm’s limited partners are a mix of pension funds, financial institutions, insurance companies, university endowments and high-net-worth individuals. Dick declined to identify any of the firms LPs.
Primus’ investment team consists of nine professionals, including three managing directors, one director, two principals and three associates. The firm’s previous vehicle, the $165 million-targeted Primus Capital Fund IV, which closed in July 1997, is now fully committed to 28 companies.