Hedge fund Artis raises $43M VC vehicle

As many hedge funds collapse under the weight of poor returns, Artis Capital Management, the hedge fund with close ties to Sequoia Capital and an investor in YouTube, appears to be moving in a different direction.

The San Francisco-based firm has raised a $43.1 million venture capital fund, according to a regulatory filing. (PE Week first reported that Artis was raising a VC fund on May 26, although the size of the fund was unknown at the time.)

The fund, Artis Private Growth Partners, counts 49 accredited investors, according to the filing, which was signed by Artis president Stuart Peterson. It discloses nothing more about the fund’s focus, who its investors are, or where they are located.

Based on the investments the firm has publicly disclosed in recent years, the firm will likely invest from the fund in a spectrum of early stage tech companies.

Last year, Artis backed six tech startups. It backed auto GPS company Dash Navigation in a $25 million Series B; alcohol-based fuel cell maker Oorja Protonics in a $15 million Series B in March; fabless semiconductor company Open-Silicon in a $10 million Series D, also in March; enterprise software company SchemaLogic in a $12.7 million Series C in July; security service provider Cast Iron Systems in a $16 million Series F in August; and Internet advertising network AdBrite in a $23 million Series C in November.

The firm’s only disclosed investments this year have been in wide-area-network startup Silver Peak Systems, whose $21 million Series D included participation from Artis, and Dash Navigation, according to Thomson Reuters (publisher of PE Week).

Artis tends to co-invest with Sequoia Capital, as it famously did when it invested behind the Menlo Park, Calif.-based firm in the video-sharing service YouTube. It then collected shares worth $83 million as a result of YouTube’s sale to Google in 2006 for $1.6 billion in stock.

It’s no coincidence that the firms have worked closely. David Lamond, son of Sequoia Capital General Partner Pierre Lamond, is one of Artis’s principals, and Artis and Sequoia have been co-investors for at least the past three years, when both firms were among the half dozen investors that backed Aruba Networks, which develops wireless local area network equipment. Artis set the terms of the company’s $19.3 million Series D financing in September 2005, a round that eventually grew to $30 million in 2006.

In fact, of Artis’ recent investments, Sequoia has participated in all of them, except for Silver Peak Systems.

The relationship has proven lucrative for Artis. Last year, Aruba Networks went public five years after its founding. Earlier this year, 5-year-old Open-Silicon, which had raised $53.7 million from investors, sold to Bahrain-based Unicorn Investment Bank for $250 million.

Sequoia Capital and Artis have more recently become embroiled in entertainment giant Viacom’s ongoing battle against Google. Earlier this month, to prove that YouTube’s business model depends on copyright infringement, Viacom filed discovery requests against Sequoia, Artis and specialty finance company TriplePoint Capital, which also held a stake in YouTube when it was acquired. The firms agreed to produce the documents early last week, according to court filings.