Arcturus Cues Up Debut Fund

Despite the harsh winter that has been predicted for venture firms, Arcturus Capital decided to brave the market storm and begin fund raising efforts for its inaugural fund.

Created through a merger between the original Arcturus Capital and Rapport Venture Partners in early 2000, the new partnership the Arcturus Capital Core Technology Fund is seeking to raise $100 million.

The new fund will be able to invest in any deal it finds attractive, however, it will mostly focus on companies spun out of HRL and X-Laboratories. Arcturus has exclusive rights to be some of the first money into start-ups borne out of those companies, particularly those that address large commercial markets based on disruptive technologies developed by top scientists.

X-Labs, a technology operating company that identifies, develops and commercializes core technologies from R&D facilities, universities, government labs and private sector commercial businesses, owns HRL and also is a wholly owned subsidiary of Boeing Co., General Motors Corp. and Raytheon Co..

HRL has earned bragging rights for creating disruptive technologies such as the world’s first laser, the self-aligned semiconductor gate and the liquid crystal display.

“Companies that come out of HRL and X-Labs will be the primary focus of the fund. What differentiates us is that we have partnerships that allow us the first shot to finance companies resulting from the original labs,” said Frank Tota, a founder and general partner at Arcturus.

As of now, the Los Angeles-based fund has garnered $10 million in soft commitments from individual and institutional investors, and expects to hold a $30 million first close in the next 30 to 60 days. Arcturus plans to hold a final close in the first quarter of next year.

What’s more, the fund expects to pump $5 million into 20 companies over the life of the investment, initially putting in between $1 million and $2 million, and then re-upping with an additional $3 million or $4 million.

Because of X-Labs’ location, most of Arcturus’ money will be spent in Southern California, which hosts five times the amount of technically trained research talent as the northern portion of the state, and yet has only 20% of the amount of venture capital under management, according to Venture Economics.

In addition to launching its fund-raising efforts, Arcturus has named Neil Rappaport and Howard Rappaport partners of the newly formed fund.

Danielle Fugazy can be contacted