RESEARCH TRIANGLE PARK, N.C. – Spun out of Raleigh, N.C.’s Marion Bass Securities as an independent venture firm at the start of the year, Southern Capitol Ventures recently held a first close on its debut $20 million fund last month.
Fund-raising began early in February for the Research Triangle Park-based firm. Weighted heavily toward investments in early-stage biotechnology and information technology companies, most of the fund’s investment capital will be provided by local angel groups and larger venture funds looking for an early eye into these sectors. Already the fund has received a $100,000 commitment from Research Triangle Park-based North Carolina Biotechnology Center, a state-sponsored initiative to develop its biotechnology industry. However, all potential limited partners – institutional investors, strategic partners and other venture funds included – have signed non-disclosure agreements with Southern Capitol and will not come to light until the fund’s final close.
Southern Capitol will make investments only in companies with $3 million post-money valuations – taking home 25% of the equity and demanding observer rights on the portfolio company’s board. Still, 60% of the fund’s investments will be concentrated in information technology and the remaining 40% in biotechnology, genomics and bio-informatics tools. Investments will stretch along the Southeastern corridor between Central Florida and Washington, D.C., but will be concentrated in the Research Triangle Park area of North Carolina, said Ben Brooks, the firm’s managing director. Brooks is the former director of investment banking at Marion Brooks.
Last year, the area – home to Duke University and the University of North Carolina at Chapel Hill – raked in $1.15 billion of venture capital investment for 87 private companies. Biotechnology-related investments accounted for nearly $66 million of that total, while investments in information technology accounted for another $883.9 million. Two biotechnology-related companies in the region so far this year – Icagen Inc. and Triangle Pharmaceuticals Inc. – have scored $36 million from private equity investors. Eighteen companies in the IT sector received an additional $233.1 million from venture capitalists this year. Investors like Abbott Laboratories, J.P. Morgan Partners and Venrock Associates have flooded the region with more than $301 million so far this year.
To date, Southern Capitol has made one direct investment and four investments though its $500,000 stake in The Atlantis Group, a local member-managed seed-stage investment group. The firm also has secured an alliance with TruePilot, a year-old early-stage investment firm active in the Research Triangle Park area. In March, Southern Capitol committed $250,000 to FullSeven Technologies Inc., a Research Triangle Park provider of branded e-mail services, following an $800,000 seed round led by TruePilot in October.