Ironside Sails Into Uncharted Waters

Ironside Ventures keeps hearing that limited partners are interested in supporting a new class of emerging fund managers. The question now is whether or not all that lip service will translate into capital commitments.

The Waltham, Mass.-based firm is preparing to launch its third venture fund, its first to include outside institutional investors.

Ironside was founded in 1998 as a $135 million venture capital affiliate of Canadian insurance giant Manulife Financial Corp., but then spun out in 2000 with a $25 million fund backed by high-net-worth individuals, firm friends and family. That vehicle is almost fully committed, and Ironside expects to start fund-raising effort early next year with a $150 million target capitalization.

“This is a good time to be putting money to work, and we’ve aligned the amount of capital we’re looking for with the team size and industry focus,” says Tony Abate, an Ironside general partner.

Abate joined Ironside earlier this year, after leaving his general partner gig with Battery Ventures. The firm’s other three GPs all date back to the Manulife days, and include Steve Brackett, Myles Gilbert and Bill Sheahan.

“We definitely have a track record to rely on, but we don’t have a lot of the baggage that some larger, or older, firms have when they try to raise funds,” says Gilbert, who worked with Citizens Financial Group Inc. before joining Ironside (formerly known as MF Private Capital). “We didn’t lose money for Manulife, even though we invested most of the first fund during the bubble years.”

Gilbert does not know if Manulife will participate as an LP on the new fund, but is certain that the $5 million minimum investment will dissuade most of Fund II’s individual LPs from participating. He says there is no plan to start a smaller side fund to accommodate such investors.

Ironside Ventures’ third fund will be larger than its predecessor funds and feature a different LP base, but its investment strategy will stay the same. This means a continued focus on seed and early-stage IT investing with a geographic focus on East Coast companies.

Abate says that he recognizes a shift by some firms away from IT investing, but feels that such moves are short-sighted.

“A few years ago we began the largest investment ever in new IT infrastructure, but we’re just now starting to scratch the surface of what that infrastructure can do,” he says.