A new IDEA: for-profit funds: Nonprofit NC IDEA spins off a venture capital fund with a $25 million goal

BYLINE: David Ranii, The News & Observer, Raleigh, N.C.

Apr. 26--The executives who run a nonprofit economic development organization in Durham hope to raise up to $25 million for a new venture capital fund that is strictly a money-making venture.

IDEA Fund Partners -- an outgrowth of N.C. Innovative Development for Economic Advancement, better-known as NC IDEA -- recently closed on an initial round of capital raised from institutional and individual investors. The fund expects to complete its fundraising efforts before the end of this year, partner Merrette Moore said.

Moore declined to divulge how much investors have committed, but said: "We are well on our way to $25 million." Venture capitalists invest in young, privately held companies with high-growth potential, which in turn use the money for purposes, including hiring employees and developing products.

The new fund is welcome news for Triangle entrepreneurs, because venture capitalists like to invest in their own backyard so they can keep an eye on their investments. IDEA Fund also plans to invest in start-ups and early-stage companies, which are the riskiest investments and therefore tend to have the most difficulty raising outside funding.

The nonprofit NC IDEA was formed in 2003 as a spinoff from MCNC, a nonprofit founded by the General Assembly that received state funding until the late 1990s. NC IDEA inherited a $25 million fund to invest in early-stage companies; that fund isn't making any new investments, although it has reserves for making follow-up investments in the companies it already has funded.

Although the nonprofit has limited its investments to companies based in North Carolina, the for-profit IDEA Fund will prospect for good investments throughout the Southeast, said Moore.

Still, he said, "This new fund will concentrate on North Carolina. We're early-stage [investors] and it's good to have proximity to the companies you invest in."

Moore said the IDEA Fund already has invested in two Triangle companies but isn't ready to discuss details.

The fund expects to make initial investments of between $250,000 and $1 million per company. Industries that it is focusing on include information technology, medical device, materials technology and companies that straddle the information technology and biotechnology industries.

"We don't foresee investing in drug research," Moore said.

The management team at NC IDEA also will run IDEA Fund Partners, led by David Rizzo, who is president and CEO of NC IDEA and managing partner of IDEA Fund. The other IDEA Fund partners are Moore, John Cambier and Lister Delgado.

Several Triangle venture capital funds have raised money recently, including Southern Capitol Ventures, Hatteras Venture Partners and SJF Ventures.

The flurry of fundraising activity is largely coincidence, but "the market is a little more frothy than it has been in previous years," said Southern Capitol founding partner Ben Brooks. "There is plenty of money out there."

Staff writer David Ranii can be reached at 829-4877 or david.ranii@newsobserver.com.

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