Carlyle Unveils New-Look Tech Fund –

It’s tough to blame the Carlyle Group for getting wrapped up in the Internet boom during the late 1990s, and one might even want to credit the firm for its ambition in trying to become a first mover in the European dotcom market. It is one of those situations where the “everybody else was doing it” rationale almost works.

However, despite the misguided plans of Carlyle’s 1999-vintage, Carlyle Internet Partners Europe, the firm was able was able to switch gears soon enough to allow it to curb losses and live to see another day. The firm joins groups such as Benchmark Capital and Accel Partners among the few VCs that headed to Europe and have managed to stay there.

That said, while the Carlyle Group has been able to maintain its European VC presence, it has become less VC-focused to do so. And as its European VC arm has evolved over the years, the latest incarnation has produced a growth-oriented, technology buyout fund.

An Auspicious Beginning, But…

In 1999, when Carlyle set out to raise the fund, it had designs on corralling ?300 million in LP commitments. Investor enthusiasm for the vehicle forced Carlyle to boost its cap, and by 2000 the firm had closed on more than ?725 million for the inaugural European Internet fund. Founder Tim Jackson and Bernard Arnault Advisor Jean-Bernard Tellio headed the fund for Carlyle, and quickly made investments in such dotcoms as early-stage investment bank Yazam, Internet B2B platform BigVine and domain-name seller Nameplanet, among others.

Everyone knows how the dotcom story ends, and many of the Europe-based Internet platforms Carlyle invested in no longer exist, including the aforementioned Yazam and BigVine. But Carlyle moved quickly to shed its dotcom brand. The firm struck the word “Internet” from the fund’s name in March 2001, and introduced Carlyle Europe Venture Partners as the fund’s the new moniker.

In addition to removing the Scarlet letter “I” from its title, Carlyle also expanded the fund’s focus to include communications services, enterprise and infrastructure software, online financial services and material sciences, as well as media deals.

Soon after, Tellio and Jackson quickly departed and in their place, Carlyle brought in Former Boston Consulting Group Head Jacques Garaialde (who was eventually was lured away by KKR) and Wolfgang Hanrieder, a former managing director at Star Ventures Management. Most recently, Carlyle poached David Fitzgerald from Apax Partners to bolster the team.

With the new people in place, Carlyle’s investment strategy moved closer to the buyout arena, and the fund now primarily invests in growth capital or LBO deals.

One recent example showcasing Carlyle’s new focus was its investment in media infrastructure outfit Inmedia Communications. The firm acquired the business through the European venture fund in April of last year, helped the business bolster its capacity through the acquisition of Cable and Satellite Transmissions in January, and this past July, exited the investment through a sale to Arqiva. The sale represented the third exit for the fund this year, and came on the heels of another buyout, the acquisition of semiconductor equipment maker Cameca.

Now, with a track record in place in the growth capital and buyout side of technology, Carlyle has hit the fundraising trail to raise a follow-up to the venture fund, the ?200 million ($242 million) targeted Carlyle Europe Technology Partners, LP. In this latest incarnation, Carlyle has washed the fund of its VC past by removing the word “venture” from the latest fund name.

The new fund has so far raised ?22.6 million, according to Form D filings with the Securities and Exchange Commission, and Barclays Funds Investments, Sieben European Growth LLC, Rashamill SA, Pictet & Cie are listed as limited partners in the new vehicle, as is individual investor Gordon Crawford.

Carlyle’s European technology fund looks to write equity checks of between $25 million and $50 million in size and will make acquisitions of as large as $250 million.

Carlyle is not the only firm to transition one of its venture funds to private equity. Accel-KKR, the technology venture partnership of Accel Partners and Kohlberg Kravis Roberts & Co. had moved its focus from VC to more of a buyout strategy, and is currently raising a similar fund in the U.S.

For Carlyle, 2005 has already been an especially kind year in terms of fundraising. The firm, in the first quarter, closed on more than $10 billion combined for its latest U.S. and European primary buyout funds, amassing $7.85 billion and $2.2 billion for the respective vehicles.