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Avante Mezzanine Raising First Fund

The firm has been fundraising since March and has a goal of $200 million, according to sources.

Avante co-founder Jeri Harman won’t comment. But the firm’s Web site says its investment targets are profitable, lower-middle market companies with defensible niches — companies in business services, healthcare, consumer staples, security, aerospace/defense, light industrial, life sciences and other industries that generate at least $3 million in trailing EBITDA. Avante plans to invest $5 million to $15 million in equity and subordinated debt.

Avante is a rarity — a women-owned private equity firm (2/3 of the partners are women) — and its founders are especially interested in investing in other women- and minority-owned businesses.

The firm isn’t confining itself to those investments, but Harman says those owners even more under-served than the rest of the lower middle market because “they’ve not been historically as networked. But I think that will change. We have to work harder to find them — there are more below the radar.”

Even though the economy is still challenging, she thinks 2010 will be a good year for investing.

One reason is that there’s far more demand for capital at the senior debt level right now than there is supply, and that gap can be filled by mezzanine funds. Lenders have pulled back, she said, and even healthy companies have debts coming due and will need capital to restructure their balance sheets. She expects refinancing to be one of Avante’s biggest activities, along with growth financing, acquisitions and minority recapitalizations.

Also, she said, good companies should be easier to spot because they’ve already been tested in the tough economy and it’s easier to get an idea of how they’ll perform.

Harman has been an investor for 27 years with American Capital, Allied Capital and several other firms, but this is the first time she’s gone out on her own. She said she looks forward to having more control over her own destiny. “I’ve been in situations where even though my portfolio did well, the institution did not do well.”

Others at Avante include founder and managing partner Stephen Adamson, partner Natasha Fox, CFO Cliff Lyon and vice presidents Ivelisse Rodriguez Simon and Paul Hayama. Harman said all six have either worked together or done business together and have gotten to know each other well over the last 10 years.