DCM Finds Fund-Raising Easy Business

In raising its fourth fund, DCM – Doll Capital Management (DCM) didn’t change its staff, its investment focus or its story.

As a result, it took the Menlo Park, Calif.-based venture firm only four months to raise $375 million for DCM IV, which the firm is expected to announce this week.

The new fund is smaller than DCM III – a $470 million vehicle raised in 2000 – but that is in keeping with the overall industry trend of smaller new funds. But other than the reduced size, little else has changed with the Fund IV.

The firm plans to stick with its current sector investment focus in semiconductors, communications and software. DCM will continue to invest about three-fourths of its deals in early-stage companies and the remaining 25% in strategic investments.

Co-founder David Chao says that the firm will spend 80% of Fund IV domestically and 20% internationally, the same ratio as in past funds. But within its allocation for international investments, China will represent a larger percentage of deals, Chao says.

Among DCM’s past investments in China is 51Job, a Beijing-based provider of recruiting services.

Chao notes that the quick turnaround in raising the fund is a vote of confidence at a time when some firms are taking up to a year to close a new fund. The firm plans to begin investing from DCM IV later this year.

The LP base is also largely unchanged, says Chao, who adds that the firm has retained virtually all of its investors from DCM III. Included among DCM’s returning two-dozen LPs are Flag Funds, HarbourVest Partners, Horsley Bridge Partners and GIC. New LPs in DCM’s latest fund is Santa Clara University and the University of Michigan.

The inclusion of the University of Michigan is noteworthy since it comes at a time when other firms – such as Sequoia Capital and Charles River Ventures – have kicked out or have purposely not invited public LPs into their new funds, because of the disclosure of their private equity performance numbers to the public. For example, the University of Michigan was booted out of a new Sequoia fund last year and asked to sell off their existing stakes in earlier Sequoia funds following the university’s release of market values and internal rates of return for each of its 122 limited partnerships with venture and buyout firms.

Chao says University of Michigan’s disclosure of fund performance is not a problem, so long as detailed portfolio information remains confidential.

DCM isn’t planning any staff expansion or new offices with the new fund. Chao says they’ll keep their professional staff at 12 for a total of 26 people in the firm, which includes support, administration and services.

In addition to Chao, the firm consists of Co-Founder and Managing General Partner Dixon Doll and GPs Tom Blaisdell, Eric Gonzales, Peter Moran, Robert Theis.

In raising the new fund in four months, it didn’t hurt DCM to have in its portfolio several visible exits, such as Semiconductor Manufacturing International Corp., which raised more than $1.8 billion in its IPO in March; iPivot, which was acquired by Intel Corp. in 1999 for $500 million; and Recourse Technologies, which was acquired by Symantec in 2002 for $135 million.

Email Jerry.Borrell@thomson.com