When Insight Capital Partners announced earlier this week that it had closed its oversubscribed fourth investment vehicle at $740 million, it served as a vindication of the firm?s exclusive focus on the enterprise software industry? in the United States.
As the New York-based firm celebrated its fund-raising feat, a much different scenario was playing out in the Netherlands, where Insight?s $250 million European fund is based. Instead of being deluged with enterprise software dealflow, the overseas sister fund has suffered through a drought and was recently told by its parent company to shut down investment activities until an independent investment committee can be formed later this summer. Moreover, a decision has been made to rename Insight Capital Partners Europe I and sever its formal relationship with the New York partners.
“In early 2000 we had a basic idea to set up a specialty European fund that would just be an extension of the type of investing we do in the U.S.,” said Scott Maxwell, a managing director with Insight. “It turned out, though, that the opportunities being turned up there were much different.”
Maxwell stressed, however, that Insight had not abandoned global investing and that approximately 15% of the new general vehicle will be dedicated to deals outside of the U.S. In addition, the European decision is not expected to have any bearing on the firm?s continuing commitment to a portfolio company named Connect Capital, which makes early-stage investments in India.
It is currently unclear what role Insight Europe?s limited partners will have in determining the fund?s future focus, although one LP said he is being kept abreast of the situation. Roel Pieper, who runs the Dutch office, did not return a message requesting comment on this issue.
As for Insight Capital Partners IV, the fund busted its $700 million target capitalization and continued Insight?s trend of trying to increase its allotment of institutional investors.
“With the existing LPs it was an easy environment ? we basically just had to make the calls,” said Bill Doyle, a managing director with Insight. “It took a bit longer with the new investors because it takes time to explain to people that while selling software to companies might utilize the Internet, it is vastly different from a b-to-c or new model b-to-b play. Because of the general confusion over business models, we spent a bit more time on the education process than we expected to.”
Doyle declined to reveal the participating LPs, although previous Insight investors include The Common Fund, Goldman Sachs Fund-of-Funds, Columbia University, Hewlett-Packard Co., MSD Capital, Grove Street Capital, FLAG Venture Partners and Bank Vontobel. The average investment into Fund IV was approximately $50 million.
The firm expects to invest at a pace of $200 million to $250 million per year with an average investment size of $20 million. The fund is expected to last three years, and has already made a trio of investments in Dorado Software Inc., Enigma Inc. and Xchange Inc.
Insight stopped adding portfolio companies to the $275 million Insight Capital Partners III last summer, although it does have some dry powder left for follow-on activities.
Dan Primack can be contacted at: Daniel.Primack@tfn.com