Funding provided to proven companies

Equity

cialization,” said Jim McBride, Blue Sage cofounder and managing member. “We really like to invest in companies that are the leaders in niche markets. That’s where a fund of our size can make a difference.”

Private equity funds differ from venture capital funds in the type of companies they back. Venture capitalists usually invest in young, unproven companies, while private equity firms seek proven companies that need money to grow.

This is the second fund for Blue Sage, which raised $170 million in 2003 from investors including Frost Bank, Wells Fargo, the state of New Mexico and the state of Oklahoma.

The firm invested that money in 13 companies, many of them family-run businesses in niches that aren’t usually pursued by private equity investors. Deals included mannequin maker Fusion Specialties of Colorado; Parker School Uniforms in Houston and one Austin investment: pizza chain Mr. Gatti’s Inc.

Of the 13 companies, five have been acquired and the others remain active.

Those sold include Omniflight, an air medical transport company based in Addison, to a Chicago private equity firm. That deal resulted in more than a 100 percent annual rate of return for Blue Sage, according to regulatory filings.

Most recently, Blue Sage profited from the sale of R360 Environmental Solutions, a Houston-based provider of nonhazardous oilfield waste treatment, which was bought by Waste Connections, also of Houston, for $1.3 million in cash in September. Blue Sage made eight times its $10 million investment, according to public records.

“Our performance gave us a huge launching pad as we moved into fundraising for Fund II,” McBride said. “It took us 12 months, whereas the average time for private equity fundraising is north of two years.”

The firm initially intended to raise a second fund of $100 million, but increased the size because of investor interest, said Peter Huff, co-founder and managing member.

Investors in the fund include large financial institutions, private equity funds, prominent family offices, endowed trusts, government entities and Blue Sage partners.

Huff said the firm, which has five investors, will spend the next three to four years investing the fund.