MEMPHIS, Tenn. – SSM Ventures hired Bill Henagan as a general partner in October for the firm’s planned Atlanta office, said Jim Witherington, general partner. The move comes as part of the firm’s strategic realignment that also includes launching two new regionally focused funds. Henagan joins the firm after a three-year tenure at Blue Ridge International, an Atlanta-based, seed-stage information technology investing firm he founded in 1997.
The motivation behind opening an Atlanta office is a result of the city’s development into a hub of entrepreneurial activity, Witherington said. “The market there has exploded in the last several years, and over the last 18 months, we’ve seen more good deals from there than anywhere else in the Southeast,” he added, noting “we plan to be a major factor in that market.” Henagan will not staff the proposed Atlanta office by himself, as both Witherington and Wilson Orr, another general partner at SSM, will split their time between the firm’s Memphis and Atlanta offices. The Atlanta office should be up and running by the end of this year or early 2001, Witherington said.
Opening the Atlanta office is just one of the steps SSM is taking to ensure a successful future for itself. After a year-long planning process that focused on ramping up its operations, the firm concluded that now, more than ever, VC is a local business. “To really be value-added partners, you need to have your feet on the ground in local areas,” Witherington said. To that end the firm’s Austin office will now operate under the name Verity Ventures and concentrate solely on deals in Texas. Meanwhile, SSM Ventures, focusing solely on the Southeast, will operate out of Memphis and Atlanta, he added. Both Verity and SSM will continue to focus on seed- to early-stage e-business and e-business infrastructure deals, he said.
Both SSM and Verity planned to hit the fund-raising market in November for new funds, Witherington said. The SSM vehicle, SSM Venture Partners III, will have about a $200 million target, while the Verity fund will have a slightly smaller target, he added. The two funds will be affiliated and co-invest with one another when the situation warrants, he said. “This gives us the best of both worlds. We can aggregate the funds to act as one, when the situation calls for a bigger investment, but the individual funds can focus on their local markets,” he said. Approximately 25% of SSM’s new fund will be allocated to co-investment opportunities in Texas with Verity Ventures, he added. The general partners of Verity and SSM will also participate in the carried interest of both funds.
Witherington said the firm tapped Henagan because his background in IT investing and knowledge of the Atlanta marketplace made him a perfect fit for what the firm was looking for in potential general partner candidates.
Henagan said he decided to join SSM because after a few years of running his own small private equity shop it seemed time to step up to the next level of the business. “So I needed to find a top-tier place to join. I approached two or three firms and had a real chemistry match with SSM’s team, because we share a similar philosophy of working with companies and building sustainable businesses in the technology space,” he added.
SSM’s current vehicle, the $114 million SSM Venture Partners II, which closed in 1998, is now almost fully committed to 18 companies. Witherington said Fund III will make initial investments ranging from $2 million to $10 million with a sweet spot of $4 million to $8 million.