Mergers News

UPDATE 2-Highland Capital raises $300 million consumer fund

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NEW YORK, July 9 (Reuters) - Venture capital firm Highland Capital Partners said on Monday that it had raised $300 million for a new fund that will invest solely in consumer companies, representing a significant boost in financing for a sector long overshadowed by technology and health care.

The Highland Consumer Fund I will be led by Tom Stemberg, co-founder of office supplies retailer Staples Inc. SPLS.O, and Ted Philip, who helped found Internet company Lycos Inc.

Highland Capital, based in Lexington, Massachusetts, already has investments in the Pharmaca Integrative Pharmacy chain; Canadian yoga apparel company Lululemon Corp.; Rec Room Furniture and Games, which sells home pool and poker tables; and Blue Tulip, which sells gifts and paper goods.

“The consumer market is large and attractive, with active IPO and M&A markets providing compelling exit opportunities for portfolio companies,” said Philip. “A dedicated fund will enable us to take advantage of the significant volume of promising investment opportunities in the consumer sector and commit the capital required to become a leading investor in the space.”

U.S. venture capital interest in specialty retail has waned considerably since its heyday in the 1980s and early 1990s.

The new Highland Capital Consumer fund would represent a substantial boost in financing for a venture segment where investments since 2001 have averaged around $150 million a year, according to data from Dow Jones VentureOne.

Venture capital investments in U.S. retailers bottomed in 2003 with $110 million in funding and reached a peak of $386 million last year. By contrast, venture funding for information technology start-ups attracted $14.3 billion and health care drew $8.4 billion last year, according to the VentureOne data. (Additional reporting by Eric Auchard in San Francisco)