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Allegis Capital seeks up to $200M

Seed stage tech investor Allegis Capital has just hit the fund-raising trail, hoping to raise a sixth fund of $150 million to $200 million, PE Week has learned from two sources.

The Palo Alto, Calif.-based firm, which has about $500 million under management, raised its last fund in 2006. That fund, Media Technology Ventures V, came in just shy of $109 million.

“It’s a tough market, but they feel very optimistic,” says a source familiar with the fund-raising effort.

As it has done with its prior funds, Allegis will seek commitments from a sovereign wealth fund that is an existing LP, pension funds, corporate investors and family offices, according to the source.

Allegis will also continue its focus on what it calls “digital economy” companies, which build enabling technology for commerce, content, communications and the enterprise.

Bob Ackerman, the firm’s co-founder and a managing director, said he could not comment on fund-raising due to regulatory restrictions. However, he said via email that he and his partners “see tremendous opportunity in the current market environment. Our own investment history has demonstrated that great companies get built in challenging economic times. If we look back to the last market downturn in 2001-2003, we funded IronPort Systems as a startup company.”

IronPort, which provides email and Web security, produced a healthy return for Allegis and its eight other venture backers, including Menlo Ventures, New Enterprise Associates and Starter Fluid. The VCs put $94 million into the company before it was bought by Cisco for $830 million in January 2007, according to Thomson Reuters.

While most VCs bemoan the lack of a market for new public offerings, Ackerman says IPOs “are by no means the only viable and profitable path to liquidity for venture companies. At Allegis Capital, our own net returns over the past 12 years have been top quartile on a relative basis and in line with historical venture norms—largely from M&A exits—on an absolute basis.”

By Ackerman’s calculations, Allegis portfolio companies that have been acquired have produced a total of $2.2 billion for their investors over the past three and a half years.

Besides IronPort, other Allegis portfolio companies acquired during that time include LGC Wireless, which offers broadband wireless solutions,, a real estate website, and Ribbit, a telephone software company:

• LGC raised $77.5 million between 1996 and 2006 from a dozen VCs before selling out to ADC Telecommunications for $169 million in October 2007.

• raised about $30 million over two rounds in 2000 from Allegis and four other venture firms before being bought by eBay for $415 million in January 2005.

• And Ribbit raised $23 million over three rounds from Allegis, Alsop Louie Partners, KPG Ventures and Peninsula Equity Partners before being bought by BT Group for $105 million last July.

Given that so many venture exits come from M&A these days, VCs must be mindful of their fund sizes, Ackerman says. “In today’s environment, you are hearing a fair amount of discussion about the role of fund size in generating traditionally anticipated levels of return from venture funds,” he says. “I expect we will hear more about this as limited partners begin to reassess how to generate returns from venture capital investing.”

Allegis has no plans to make changes to its lineup with the new fund, according to the source.

Besides Ackerman, Allegis has four other managing directors: Peter Bodine, who joined the firm in 2006, Jon Funk, who joined in 1996, Spencer Tall, who joined in 2004, and Barry Weinman, who co-founded Allegis with Ackerman in 1995,

The team also includes two general partners: Lara Druyan, who previously ran Silicon Graphics’ desktop software business, and Jean-Louis Gassée, the onetime president of Apple’s Products Division. —Lawrence Aragon