Drazan launches growth fund

Jeff Drazan, former managing director at Sierra Ventures, has moved away from the venture space in which he built his name as he launches a new growth capital firm called Bertram Capital.

Drazan says that the fund formation process “wasn’t all that quick.” However, it would appear he is just being humble. Bertram sent out its first PPM in June, and closed on $250 million in early August, just two months later. The debut fund, Bertram Growth Capital I, raised $250 million in commitments from 15 limited partners. Drazan wouldn’t disclose investors, but he says the LPs consist of “a pretty even mix of institutional LPs,” which includes a pension fund, an endowment, a foundation, an insurance company and an investment advisory firm. “The hardest part was helping the LPs understand our model. At first many of them told us that they couldn’t invest because we didn’t fit in one of their two buckets, private equity of venture capital.”

Bertram, it turns out, is neither, according to Drazan. Instead the firm is finding a niche in between pure venture and pure buyout. Drazan says that the firm is a growth capital investor that will place $25 million in each of 10 well-established companies with revenue of between $20 million to $40 million and that are at breakeven. Bertram’s investment scope runs from minority investments with strong rights to control investments.

Similarly, the firm has a broad investment scope, with a sector focus that includes health care and health care services, industrial manufacturing, and Internet companies.

Asked to provide a model for his firm, Drazan points to “TA Associates and Summit Partners in their early days,” and to firms such as The Riverside Co. in Cleveland or Stone Arch in Minneapolis—firms he describes that are aiming at mid- to low-cap investments and plan to add value not through financial leverage, but by building portfolio companies and their revenue.

Drazan founded the new fund alongside his brother, Ken, a hepatic surgeon and co-founder of venture-backed ArgiNOx Pharmaceuticals Inc. The firm is named in honored of their father Art, who owned a series of boats made by the Bertram yacht company. “Ken, he and I used to go fishing several times a week throughout our childhood. He is 73 and still boating and fishing,” Jeff Drazan said.

Drazan also announced that the group has four investment professionals who serve as vice presidents at Bertram: Mike Chang (formerly of Apax Partners), Jared Ruger (formerly Oak Hill Capital Management, Draper Fisher Jurvetson), Joe Tou (formerly Intel, Selectronics) and Ryan Craig (formerly of HealthNet).The current team is preparing for the firm’s first investments.

Drazan’s firm was founded from a corner office in Sierra’s Menlo Park, Calif., headquarters, where Bertram will remain until it finds new digs. Drazan says that he will remain a managing director of Sierra Ventures, which recently closed fund IX. He continues to sit on the boards of four Sierra portfolio companies and serves as the chairman on three of those companies. —Jerry Borrell