Industry Competes for Assets

The U.S. Bankruptcy Court in Phoenix is overseeing a secondary sale of venture capital fund stakes from the Baptist Foundation of Arizona. And Cornerstone Equity Partners exercised a legal right to match a winning bid by San Francisco-based Industry Ventures for the assets.

Industry Ventures reportedly won the secondary auction with a bid of $4.1 million. A source familiar with the deal confirmed that Cornerstone Equity matched Industry Ventures’ bid, but said that the transaction is not a done deal.

If Cornerstone is not able to complete the deal, Industry Ventures could still walk away the winner.

The Baptists Foundation assets in question, according to court documents, are Cornerstone Fund I and Ventures Fund I. Cornerstone Fund I is managed by Phoenix-based Grayhawk Venture Partners (the successor to Cornerstone Equity Partners), according to Thomson Venture Economics (publisher of PE Week).

The fund’s portfolio includes NetPro Computing, a Phoenix-based provider of security and control services for various business network functions. Its other backers include Diamond Ventures, JMI Equity and Novell Ventures and it has raised about $6 million since its 1997 founding.

The Cornerstone Fund I portfolio also includes Phoenix-based health care information provider Quality Care Solutions. Quality Care Solutions raised more than $8 million from investors that included Dominion Ventures and Sundance Venture Partners.

The Baptist Foundation was a nonprofit investment company that went bankrupt in 1999 owing more than $550 million to about 11,000 investors.

Several former officers pleaded guilty to felony charges relating to fraud allegations. And two former officers are currently on trial for defrauding investors.

Industry Ventures recently held a first close on its fourth fund. The firm is seeking $100 million with a cap of $150 million.