The extraordinarily-amicable divorce between Jeffrey Drazen and Sierra Ventures is in its final act, as Drazens new firm has closed its inaugural fund with $250 million. Named Bertram Capital, the firm will formally open on Sept. 5 and will focus on growth capital opportunities in the business services, tech, healthcare (non FDA-track) and industrial manufacturing sectors.
Drazen has been with Sierra Ventures since 1984, but its always been a bit of a strange fit. The firm is avowedly early-stage, but many of Drazens most successful deals have come from Series B or Series C investments. For example, Sierra didnt invest in Theravance (Nasdaq: THRX) until its third round in 1999. There are some notable early-stage exceptions in his portfolio (American Fiber, Element Labs, etc.), but it wasnt terribly surprising when Drazen began trying to push Sierra toward his way of thinking two years ago. It also wasnt surprising that he was unable to do so.
The principals at Sierra really wanted to continue doing early-stage investing, and I saw more opportunity elsewhere, Drazen says.
So Drazen decided to leave around 18 months ago. Rather than just walking out the door, however, he and his partners worked out a friendly arrangement whereby he would remain until Sierra VIII was fully invested. He then would begin raising his new fund simultaneous to the fund-raising for Sierra IX, and would leave once both efforts were finished (Sierra IX recently held a first close, and nearing a final close). He also will continue to represent Sierras interests in four portfolio companies: Theravance (which GSK has an option to buy next July), Element Labs, Valere Power (picking bankers) and American Fiber Systems Inc. (also picking bankers).
Drazen says he still loves the early-stage VC business, but doesnt necessarily believe in its long-term viability for firms that raise large funds. Instead, his new firm plans to invest around $25 million in companies that have between $20 million and $40 million in revenue. Minimum stakes will be 20%, but it will buy companies and participate in corporate spinouts when possible. Exits may be through the public markets, but Drazen really seems intent on selling to other private equity firms. As an example, he points to Micro Power Electronics, which received expansion capital from Sierra Ventures in 2004 and then was sold earlier this year to Weston Presidio.
The Bertram team includes: Drazen, his brother Ken, Mike Chang (formerly of Apax Partners), Jared Ruger (formerly of Draper Fisher Jurvetson), Joe Tou (formerly of Intel Corp.) and Ryan Craig (formerly of HealthNet). It also is looking to hire at least one more VP-level pro, and a handful of associates.