American Capital dives into venture investing: Former execs from Advent, Battery to lead VC practice

American Capital Strategies Ltd. (Nasdaq: ACAS), a $7 billion publicly traded buyout and mezzanine investment firm, today will announce the creation of a substantial venture capital practice headed by former partners at Advent International and Battery Ventures.

The effort will focus on technology companies, with the flexibility to do everything from $5 million early tage deals to $100 million late-stage deals.

“Two years ago, we decided to build out the organization so that it would have the capacity to do other things in the areas of equity and sub debt,” says Malon Wilkus, president, chairman and CEO of ACS. “Specifically, getting into venture capital is part of a somewhat larger strategy involving tech-driven companies. We’ve already been working on later-stage and mature tech companies, and now we’ll also be able to focus on earlier-stage companies.”

The venture effort will be called American Capital Technologies and will be funded out of the same publicly traded evergreen pool from which ACS does all of its deals. There is no specific allocation to venture capital, but there also are no set restrictions (all deals, however, will be reviewed by an investment committee).

Six managing directors, plus a handful of principal and associate-level personnel, will lead American Capital Technologies from offices in Boston and Silicon Valley. The first two managing directors are Andy Fillat, former head of North American venture investing for Advent International, and Anthony Abate, a former general partner with Battery Ventures and Ironside Ventures. The pair spent part of last year contemplating whether to start an independent VC shop that also would have included Doug Schrier of Argo Global Capital, but they say that they ultimately felt the ACS opportunity was more attractive.

“This is a professional investment organization that does deals to make money, not corporate VC doing strategic deals,” Fillat says. “This is a great opportunity to build a team that doesn’t want to spend its time fund-raising.”

Abate adds that the firm’s evergreen structure means that it has no pressure to do tech deals when tech cycles are out of favor, and that the firm’s public status means that it marks deals to market each quarter. “There is no pressure to prop up existing deals to support fund-raising,” he says.

The team is already doing due diligence on deal opportunities, and plans to add two of its three West Coast partners within the next two weeks.

It also will be supplemented by current ACS pros Miles Armone, a onetime entrepreneur-in-residence with Charthouse Group International, and Dave Gessel, former head of technology engineering company Black Rose Technology.