New Funds Come to Austin

Local investors chip in money for regional fund designed to assist midsize companies

From the February 14, 2003 print edition

Stacey Higginbotham   Austin Business Journal Staff

Several players in the Austin business community have become limited partners in a venture fund that taps their money and networking skills to help midsize companies succeed.

A total of $50 million may be available to such companies.

Keith Moe, a former 3M Co. executive; Gary Edwards, a ConocoPhillips senior executive vice president; Katie Gaffney, a film producer with ties to NBC's Katie Couric; and angel investor Harvey Ring have written checks of $250,000 to $1 million each to join the InvestLinc South Central Fund.

The fund is the first of 10 regional funds InvestLinc is creating. InvestLinc, in business for about 10 years, has about $70 million under management.

Hoffman Estates, Ill.-based InvestLinc Financial Services LLC, which does business as InvestLinc Group, is the holding company for five different susidiaries, including fund manager InvestLinc Private Equity.

Troy Wiseman, founder and chairman of InvestLinc Group, says the concept behind the fund is less about raising money and more about investing in social capital or who you know. The concept calls for InvestLinc to gather 99 people who have high-level connections within a variety of industries and can assist portfolio companies in meeting dealmakers.

"Who we know is how we make money and see deals," Wiseman says.

Because Wiseman believes so strongly in helping a startup grow through InvestLinc's network, he assigns an InvestLinc investor to a portfolio company to help it manage contacts and expand. The portfolio company pays the InvestLinc representative a salary negotiated by the startup and the person who will mentor it.

InvestLinc's latest fund also differs from other venture funds because 50 percent to 75 percent of it is invested in an established real estate portfolio. That leaves just $6.25 million to $12.5 million to be dispersed among companies in Texas, Oklahoma and Arkansas.

Although the amount left after real estate investments seems small, Wiseman says the fund usually invests only a small amount less than $1 million in deals, but InvestLinc's limited partners are welcome to chip in their own funds.

When you combine the fund's money and the partners' additional investments, the amount available in Texas, Oklahoma and Arkansas is close to $50 million, says InvestLinc investor Bob Martin, CEO of Austin venture capital consulting firm JumpStart Partners Inc.

He says the fund benefits Austin because it concentrates on midsize companies with revenue of $5 million and $25 million each. Also, InvestLinc targets a variety of companies, as long as they already have products and are approaching profitability.

"It's great to have another fund that focuses on midmarket companies," Martin says. "I don't think we have enough of those [funds] in this region right now."

Jim Jung, director and senior vice president of Sterling Heights, Mich.-based Big Net Holdings Inc., says InvestLinc helped his firm raise more than $13 million and also supplied big-name board members such as John Couch, a former vice president at Apple Computer Inc.

"[Couch] gave us a lot of credibility on Wall Street," Jung says.

That credibility came in handy as Big Net tried to go public. However, a few days before the offer was set to be priced in April 2000 the stock market crashed and the dot-com boom was doomed.

After the company retreated to wait for a more opportune time to go public, Couch left the board. But Jung says working with InvestLinc helped him secure deals and learn more about growing his business than he would have through a traditional venture capital firm.