Austin Steamed Over Bogus Report –

Austin Ventures was playing defense earlier this month, after a financial publication incorrectly reported that the firm planned to raise an $800 million fund dedicated to later-stage investing. John Thornton, a managing director with AV, denied the report almost in its entirety, but declined to comment further, at the request of firm attorneys.

Sources close to the firm, however, said that the mistaken report was borne of a pair of joint ventures that AV recently entered into with later-stage investment groups. The first is a deal with Texas Growth Fund (TGF), an Austin firm that makes equity and subordinated debt investments for small-to-middle-market companies that do business in Texas. TGF has raised three funds since its 1992 inception, but almost all of its limited partners have been Texas-based public institutions, which has caused TGF to suffer endless headaches due to ongoing disclosure controversies within the state. When it came time to raise its fourth fund-with a target capitalization of $300 million-TGF wanted to diversify, at which point it began discussions with AV.

Under terms of the agreement, AV is introducing the TGF fund to all existing AV limited partners. What AV gets out of this deal is a bit unclear, although it certainly will gain greater access to later-stage dealflow and expertise.

AV also has struck a similar deal with Escalate Capital, a new later-stage structured finance firm launched by Ross Cockrell, a former AV general partner, Tony Schell, former head of Comerica’s technology and life sciences lending office in Austin and Jim Ellison, formerly of Silicon Valley Bank. Escalate currently is marketing a $200 million inaugural fund, and expects to hold a first close later this quarter.

In addition to its joint ventures, AV continues to make certain late-stage investments out of its own funds. The firm dedicated one-third of its $830 million eighth fund (reduced from an initial $1.5 billion close) to later-stage investing, and plans to maintain that allocation for a $500 million ninth fund that is slated to close later this quarter.