Exclusive: Terry Garnett, Rob Theis join forces to launch “venture buyout” firm

Firm: Garnett Theis Capital

Fund: Garnett Theis Capital

Target: $450 million to $500 million

David Helfrich, 57, who helped form Garnett & Helfrich back in 2004, is retiring, setting up the need for Garnett to form a new firm, according to the source. The new buyout shop is operating from the San Mateo, Calif.-based office of Garnett & Helfrich.

Garnett Theis Capital plans to invest $50 million to $75 million in five to six companies that can potentially be platforms for add-on deals. The “venture buyout” model pioneered by the firm typically involves the purchase of neglected, underperforming divisions of technology companies.

“What we do is a cross between venture and buyouts,” said Garnett in an interview with Buyouts for a profile of Garnett & Helfrich Capital earlier this year. “We acquire these companies, but we almost have to treat them like startups. We get the technology and the customers, but then we have to build the management team, come out with new products, and reinvent the business.”

The idea is to create high-growth leaders in the vein of Actian, Wyse Technology and Blade—all portfolio companies owned or sold by Garnett & Helfrich. The firm also plans to make three to four investments of $20 million to $30 million each in standalone buyouts of venture-backed companies and “select, high-quality later-stage deals,” according to a marketing document obtained by Buyouts. Some of these smaller deals may be add-ons.

Theis, who has left Foster City, Calif-based Scale Venture Partners, worked with Garnett to pioneer Garnett & Helfrich’s venture-buyout model in the 2002 deal to carve out PGP from Network Associates. Garnett was at Venrock at the time and Theis worked at venture firm DCM. They grew PGP’s security software offerings and built the company to $100 million in revenue before selling it to Symantec for $350 million in 2010. All told, the pair have worked on several deals spanning 20 years.

From 2008 to 2014, Theis was a managing director of Scale Venture Partners, where he co-managed the transition of the venture capital group from Bank of America to form the foundation of Scale Venture Partners.

Garnett & Helfrich Capital LP, the vintage 2005 fund that proved to be the only fund raised by Garnett & Helfrich Capital, rang up an IRR of 23.6 percent and a 3.9x investment multiple as of Dec. 31 for a captive fund of funds managed by Grove Street Advisors for the California Public Employees’ Retirement System, according to public pension fund performance data compiled by Buyouts.

Other limited partners in the $350 million Garnett & Helfrich Capital fund included Harvard Management Company, HarbourVest Partners, University of Michigan, Kemnay Private Equity, Silicon Valley Bank, Park Street Capital and Stanford Management Company.

(Correction: Rob Theis co-managed the transition of the venture capital group from Bank of America to form the foundation of Scale Venture Partners; the original version of this story said he co-managed the actual spin-out.)