Meritus Ventures, L.P. Announces Receipt of Conditional Approval as a Rural Business Investment Company

Monday June 06, 2005
Meritus Ventures, L.P. announced today that it has received conditional approval from the United States Department of Agriculture (USDA) and the United States Small Business Administration (SBA) as a Rural Business Investment Company (RBIC) under USDA’s Rural Business Investment Program (RBIP).

London, KY and Oak Ridge, TN – Meritus Ventures, L.P. announced today that it has received conditional approval from the United States Department of Agriculture (USDA) and the United States Small Business Administration (SBA) as a Rural Business Investment Company (RBIC) under USDA’s Rural Business Investment Program (RBIP).

Meritus Ventures is a private, for-profit, venture capital fund established to make equity investments in private companies in rural southern and central Appalachia. The general partner of the fund is Eclipse Management, LLC., a for-profit company established by Kentucky Highlands Investment Corporation (KHIC) of London, KY, and Technology 2020 (Tech 2020) of Oak Ridge, TN. Meritus is the second venture capital fund established through the joint efforts of KHIC and Tech 2020.

In 2001, KHIC and Tech 2020 worked together to establish Southern Appalachian Management Company, LLC., to be the general partner for the Southern Appalachian Fund, L.P. The Southern Appalachian Fund is a $12.5 million private, for-profit, venture capital fund that became operational in 2003 and is currently investing in early-stage and expansion-stage, private companies in southern Appalachia.

Meritus Ventures will be managed by Ray Moncrief (President of Eclipse Management, LLC) and Grady Vanderhoofven (Executive Vice President of Eclipse Management, LLC). The fund will have offices in London, KY and Oak Ridge, TN.

The conditional approval of Meritus Ventures means the fund has successfully passed the USDA and SBA review process, and the fund management team has been approved to manage the fund as a RBIC, subject to raising $10 million of private capital and obtaining final approval from USDA and SBA. Upon successfully raising $10 million of private capital and obtaining final approval as a RBIC, the fund will be able to access an additional $20 million of private capital via the sale of debentures guaranteed by USDA. In total, the fund will have $30 million of capital targeted for equity investments in companies located in rural areas of southern and central Appalachia.

As part of the announcement, Ray Moncrief stated, “I applaud the United States Department of Agriculture for creating the Rural Business Investment Program that provided for Rural Business Investment Companies in the 2002 Farm Bill. The RBIC application process was rigorous and both the SBA and USDA conducted the process very professionally.” Moncrief further noted, “There is a significant demand for equity capital by early and expanding businesses in rural America. The experience that we have had with the Southern Appalachian Fund has proven that many quality companies exist in rural Appalachia.”

Of the $10 million of private capital to be raised as a pre-requisite for final approval as a RBIC, Meritus raised $2.2 million of investment commitments before receiving notice of conditional approval. Investors that have already committed to invest in Meritus include the F.B. Heron Foundation and the Central Fund of the Community Development Venture Capital Alliance, both in New York City, and several high net-worth individuals in Kentucky and Ohio.

“The F.B. Heron Foundation has particular interest in Meritus Ventures because of the track record that the Meritus management team has of successfully investing in underserved rural communities where virtually no venture capital is invested,” said Luther Ragin, Jr., Vice President of Investments of the F. B. Heron Foundation.

"Meritus Ventures joins a vital and rapidly-growing industry of funds that seek market rates of return for their investors and create important economic impacts in underinvested regions of the country," said Kerwin Tesdell, President of the Community Development Venture Capital Alliance. "It will be operated by one of the industry's premier management teams, with a proven track record of making money where other venture capitalists tend not to invest."

Once the fund becomes operational, it will focus specifically on companies located in rural areas in Kentucky, Tennessee, and the Appalachian counties of Ohio, West Virginia, Virginia, North Carolina, South Carolina, Georgia, Alabama, and Mississippi. The fund will have twelve (12) months from the date of receipt of conditional approval (June 1, 2005) to raise the balance of its investment commitments and finalize all requisite documents and agreements with investors, USDA, and SBA. The fund managers expect the fund to begin investing in the second or third quarter of 2006.

“Conditional approval of Meritus Ventures is a landmark event for our region. Once this fund is formally licensed as a RBIC by USDA and SBA, it will be a source of equity capital for businesses that historically have not had access to equity capital,” said Grady Vanderhoofven, Executive Vice President of Eclipse Management, LLC, and one of the two fund managers. “This fund targets promising companies in our region, and our experience with the Southern Appalachian Fund has demonstrated that we have access to very attractive deals that most venture funds don’t see because they generally don’t look for deals in this part of the country. We are very appreciative of the vote of confidence we have received from USDA and SBA and from those investors that have already made investment commitments to Meritus Ventures.”


About the Rural Business Investment Program – The U.S. Congress authorized the Rural Business Investment Program (RBIP) in the 2002 Farm Bill. The purpose of the RBIP is to promote economic development and to create wealth and job opportunities in rural areas by encouraging developmental venture capital investments primarily in smaller enterprises and by meeting the unmet equity capital needs of such businesses. The program is similar to existing SBA venture capital programs – specifically, the Small Business Investment Company (SBIC) and New Markets Venture Capital (NMVC) programs – and is intended to license Rural Business Investment Companies (RBICs) through a competitive process. (www.sba.gov/INV/RBIP)

About Kentucky Highlands Investment Corporation – KHIC was formed in 1968 to stimulate growth and create employment opportunities in southeastern Kentucky. It has invested more than $141 million in 405 companies, contributing to the creation of 10,431 jobs. (www.khic.org)

About Technology 2020 – Technology 2020 is a public-private partnership based in Oak Ridge, Tennessee. The mission of Tech 2020 is to start and nurture technology-based businesses. It has helped more than 85 technology companies create more than 1300 new jobs since beginning operations in 1995. (www.tech2020.org)

About the Southern Appalachian Fund, L.P. – The Southern Appalachian Fund is one of six New Markets Venture Capital Companies in the United States. The $12.5M venture capital fund was formed to provide equity capital and operational assistance to qualifying businesses in southern Appalachia. The Fund focuses specifically on companies in Kentucky, Tennessee, and the Appalachian counties of Georgia, Alabama, and Mississippi. (www.southappfund.com)

About The F.B. Heron Foundation – The F.B. Heron Foundation has more than $250 million in assets and is a private, grantmaking institution dedicated to supporting organizations with a track record of building wealth within low-income communities. (www.fbheron.org)

About the Community Development Venture Capital Alliance – The Community Development Venture Capital Alliance (CDVCA) is the trade association for the rapidly growing community development venture capital industry. Formed in 1993, CDVCA promotes use of the tools of venture capital to create jobs, entrepreneurial capacity and wealth to advance the livelihoods of low-income people and the economies of distressed communities. The CDVCA Central Fund seeks investment opportunities to put capital to work in a meaningful way in the community development venture capital industry. (www.cdvca.org)

Media, for more details on the fund:
Ray Moncrief, President, Eclipse Management, LLC. – (606) 864-5175
Grady Vanderhoofven, Executive Vice President, Eclipse Management, LLC. – (865) 220-2020

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