General Catalyst Closes On $200M

With a combined 60 years of entrepreneurship under their collective belts, the five partners at General Catalyst have always been endeared to the kindred innovators they have bankrolled since the firm’s founding in 1999.

As such, the Boston-based private equity firm for the first time raised an entrepreneurs side fund to go along with its $200 million sophomore investment vehicle.

Monikered General Catalyst Group II LP, the main fund closed just last week, and its companion is slated to close within the next few weeks.

“We’ve got great relationships with entrepreneurs having been entrepreneurs ourselves,” said John Simon, a co-founder general partner with General Catalyst. “The side fund gives us an opportunity to enhance our relationship with them, in terms of deal flow and the ability to work with them on new investment opportunities.”

Simon declined to disclose the size of the entrepreneurs fund, except to say that it comprises a very small percentage of General Catalyst II.

Like its predecessor, General Catalyst II will invest primarily in early-stage software tools, technologies and platforms, as well as commerce-enabling infrastructure plays.

The fund will also back companies that are, as Simon put it, “in transformation.”

“These are companies that, with the right tools, technology and management, could transform themselves into industry leaders,” he said. “By injecting [the proper] people and platforms into these companies, you can change the way they think about themselves and the way they do business.”

The importance of building and strengthening companies certainly isn’t lost on Simon and his colleagues. Prior to signing on with General Catalyst, Simon founded and served as chairman and CEO of UroMed Corp., a provider of urological and gynecological solutions to help cure stress urinary incontinence. UroMed recently changed its name and is currently doing business as Alliant Medical Technologies.

Additionally, the firm’s four other partners – Joel Cutler, David Fialkow, William Fitzgerald and David Orfao, the firm’s newest hire – have all founded and served as operators for companies in a variety of industries, including travel, information services, Internet software and specialty retail.

Therefore, they claim they can provide not only financial support to their portfolio companies, but also entrepreneurial and creative capital as well.

“A lot of times, we’re involved in the creation process. It’s different than managing a private equity portfolio,” Simon explained. “Our backgrounds aren’t suited towards a hands-off strategy.”

Since it is double the size of the $100 million General Catalyst I, Fund II will pump between $10 million and $15 million into each deal over the life of the investment. The fund will likely invest in between 12 and 15 companies within the next two or three years.

General Catalyst I still has plenty of dry powder left, although most of that capital will be dedicated to follow-on financings, Simon said.

As with Fund I, General Catalyst plans to seek most of its deals close to home, within a one- to two-hour plane flight. The firm may also look to pursue a very small number of transactions in California, Simon said.

Currently, the firm is in the midst of wrapping up its first investment from the new fund.

Simon declined to reveal the company’s name, but he did say it was in the next-generation Web infrastructure software space.

Robyn Kurdek can be contacted at: