Penn Venture Partners believes that a significant opportunity has developed for nontraditional capital providers to provide financing to small companies in circumstances having the potential for attractive risk-adjusted returns. The Fund's investment strategy is to target, as financing candidates, companies with either successful products or services or proven technologies or market niches that suggest improved profit potential if defined capital needs can be met by the Fund. This approach will include identifying solutions to problems confronting a company, or developing new market, product, financial, or operational strategies that can enhance a company's profit and growth potential. While opportunistic in nature, this strategy is implemented primarily in industries and markets in which the Fund's Principals have previous management or investment experience. The Fund expects that the majority of its investments will be in companies requiring either growth or expansion capital. The Fund additionally seeks to stimulate economic growth by making qualified investments in small businesses based in Central and Northern Pennsylvania that will in turn create and retain employment in the region.

The Fund concentrates significant energy on identifying, evaluating and providing initial institutional investment to companies at the growth or expansion stage of development. The Fund strategy is to invest in companies that currently have an established product or service and are generating profits or have significant profit potential, but are in need of growth capital that cannot be obtained through traditional capital sources due to lack of collateral or an inadequate capital base. Investments are made in companies that may or may not be currently backed by a venture capital firm because of the industry or capital requirement. The Fund expects to hold investments in these companies from two to five years.

Each initial investment is expected to range from $500,000 to $1,250,000, depending upon the needs of the particular company. The total Fund investment in any particular portfolio company, including follow-on financing as the portfolio company achieves its goals, will generally not exceed $2,000,000.

Eighty percent of portfolio companies must initially satisfy the SBA-required size limitation for smaller businesses. These general limitations are a net worth no greater than $6 million and, for each of the prior two years, annual profit after tax must not exceed $2 million. Investment in somewhat larger companies may be permitted pursuant to industry specific SBA regulations.