A Cincinnati venture capital firm is raising a $20 million fund, just a couple of months after it wrapped up its first fund.
Hyde Park-based H Venture Partners has begun raising its second fund and just completed the first close on that fund Sept. 24, Elizabeth Edwards, the fund’s founding partner, told me.
“We were really excited to get fund one raised, and it was time to raise fund two,” Edwards said. “We had put so much capital to work and we had a strong pipeline. We don’t want to be in a situation where we didn’t have more capital to invest.”
H Venture has already raised about $10 million for its second fund, Edwards said. It added a public pension fund, which she declined to name, as an investor.
“That’s a great inflection point,” Edwards said. “That’s meaningful institutional capital.”
The fund also brought back many investors from its $10 million first fund that it just finished raising this summer. Those investors include dozens of retired consumer and retail executives who work with it.
H Venture, which stands out as a women-run firm as 93% of venture capital is managed by white men, invests in science-based consumer brands. The second fund will keep the same investment focus, Edwards said.
But with the larger second fund, it will be able to write bigger checks to companies. Its investments in the second fund will likely range from $500,000 to $1 million. In the first fund, which has 10 companies now and could reach 15, its investments typically range from $250,000 to $500,000. The second fund will probably also stick to about 15 investee companies.
“The larger check sizes will allow us to lead more deals,” Edwards said. “Leading deals is important.”
As the lead investor, H Venture can take more control of the company’s destination in terms of valuations, can determine its co-investors and play a bigger role by gaining a seat on the investee company’s board.
The fund’s focus is different than most venture capital firms that focus on areas such as technology or health care.
“You don’t see many VCs focused on consumer,” she said. “And the focus on science-based consumer brands is a bit of a new area. Many investors aren’t aware of how technical consumer (products) are.”
Diapers, for example, might have numerous patents tied to the product. Materials and the manufacturing process involve technology.
Edwards didn't hazard a guess on when H Venture would wrap up fundraising for fund two. But she said the average fund takes 12 to 24 months to raise.
"I don't think we're going to need that," she said, adding the firm still has a wait list of investors from fund one.
It’s a different process raising money during a pandemic, Edwards said. While it presented challenges, meetings over Zoom saved a lot of travel time.
“In many ways, the pandemic has made our type of work more efficient,” she said. “Institutional investors have gotten more efficient with their time and are able to take more meetings. How fast we raised fund two is indicative of the fact that capital is moving faster than it has in the past because we’re not wasting so much time traveling. And location has become irrelevant.”
That effect has also helped H Venture in its efforts to work with investee companies.
“When it comes to screening new investment opportunities, we’re more efficient because we don’t have that friction of travel,” Edwards said.
Edwards is seeing plenty of opportunities to invest the additional capital.
“We’re investing in a space that’s undercapitalized,” she said. “There are few VCs that focus exclusively on consumer. That really helps.”
H Venture’s investments include:
- Avaline, a Los Angeles-based organic wine brand launched by actress Cameron Diaz. Each wine is made with organic grapes grown without pesticides.
- Kindra, a Procter & Gamble spinoff used to treat symptoms of menopause.
- Hazel, a New York-based company that makes incontinence products. H Venture is a lead investor in that firm operating in a high-growth field.
- Parsley, which provides a holistic approach to consumer health and features a telehealth offering.
