Hunt spins out early-stage venture business

Hunt spins out early-stage venture business

Hunt Consolidated Inc.’s investment arm has completed its second spin-out of 2009, this time sending its early-stage venture capital business off to become a separate entity.

Formerly known as Hunt Ventures, Covera Ventures is now seeking deals as an independent, Dallas-based firm, though it continues to invest and manage the first and only Hunt Ventures fund, called Hunt Ventures Fund I LP, which received investor commitments totaling $140 million.

Jeff Williams, who owns Covera with the firm’s other managing director, Steve Coffey, said Hunt Consolidated’s investment arm, Hunt Investment Corp., had been meaning to spin out the former Hunt Ventures management team for some time.

“This has been part of the strategic plan for Hunt Ventures” from the beginning, he said. With the slow economy, the timing was right to get the move done, since all the parties involved weren’t busy with other things, he said. “It was a good time to put it behind us.”

In October, the Dallas Business Journal reported that Hunt Investment Corp. had spun out a Dallas entity called Terra Verda Partners, which, among other things, is helping its former parent find environmentally friendly firms to consider for investments.

The Hunt Ventures fund that Covera is managing still has capital to invest, according to Williams. He declined to put a number on that, but added that the fund still has money left for new deals.

“We have 14 active portfolio companies today,” he said, along with four firms in which the firm has cashed in its investments.

Of the 14 existing companies, four are based in the Dallas-Fort Worth area: iTKO, RipCode, AppTrigger and SensorLogic. None of the “exits” — meaning investments in which the Hunt Ventures fund has reaped a return on its investment — involved local businesses, Williams said. “But we’re hopeful.”

Based in Dallas, Hunt Consolidated is a holding company with interests in energy, real estate and private equity. Run by Dallas business icon Ray L. Hunt, Hunt Consolidated has estimated revenue of $2.13 billion, according to the Dallas Business Journal’s Top 200 Private Companies list. Its Hunt Investment arm was added more than a decade ago to help diversify.

Covera plans to essentially follow the same investment strategy it had when it was under its former parent’s umbrella. Although it invests nationwide, the emphasis is on Texas. It puts money into Internet infrastructure, Web-based technologies, enterprise software and wireless mobility technology. It initially puts between $1 million and $5 million into companies, making it the largest or co-largest backer of the companies’ first round of institutional funding. Covera takes a board seat in the businesses in which it invests, and helps them with everything from customer introductions to building teams and raising subsequent rounds of financing.

“We see a real opportunity in early-stage technology investing,” Williams said. “There are fewer funds doing early-stage investing.”

Covera officials plan to start raising a second fund, targeted at $125 million, next year. “We’re still in the formation of that fund,” he said.

The company has offices in on the 16th floor of Two Galleria Tower in Dallas, which is home to several other venture firms, including Sevin Rosen Funds and CenterPoint Ventures.

The past year has been difficult for venture capital firms because their investors — primarily large institutions like pension funds, foundations and endowments — have had significant losses, according to Roman Kikta, managing partner at the Addison venture firms Genesis Campus and Mobility Ventures.

“I think that cautious outlook has slowed things down,” he said.

The flip side is that now is a good time for venture investors to be deploying their money, Kikta said.

“I believe this is a very good time for venture capitalists to be investing in companies,” he said. “Valuations are low and prices are reasonable as the economy picks up … By making investments now, we’ll be in a stronger position in the years to come.”