– Jerusalem Venture Partners’ third fund sets scorching pace

Jerusalem Venture Partners (JVP) has not let the grass grow under its feet since capping its third fund on $160 million (e165 million) last December. Founding partner Erel Margalit reports that the vehicle has already committed slightly more than half its capital in six new and three follow-on deals, presaging a rapid return to the fund-raising market for JVP.

One of these deals perfectly typifies the way the venture funding model is changing and expanding, resulting in a greatly accelerated investment pace.

JVP led a $26 million seed funding round for Cogent Communications, an all-optical Internet Service Provider (ISP) based in Washington, DC. Investing $10 million itself, JVP brought Worldview Technology Partners, Oak Investment Partners and Boulder Ventures into the syndicate.

Cogent is the first all-optical ISP and enables companies to bring 100Mbps to the desktop at the same price as conventional delivery systems.

The company plans to roll out its service to the 800 largest multi-business sites in the 12 largest US urban centres.

Erel Margalit predicts that JVP will see further major service deals in the near future that will take advantage of the firm’s investments in optical and wireless equipment companies like Netro and Chromatis.

“In our seven years of operation we have backed a number of technologies that have been key in enabling major broadband Internet devices. Now what we are looking to do is to take equipment technology companies that are offering new service models”, says Margalit.

JVP now operates in Europe as well as the US and Israel and is seeking aggressively to capitalise on this technological and commercial axis, transferring technologies and e-commerce brands from market to market.

“Most European companies start with an eye to their domestic market and they can really use a perspective that looks globally” comments Margalit. He does, however, sound a note of caution regarding current market conditions in Europe. “I am worried that some of the people putting money to work fast in ventures in new sectors have neither the time nor the bandwidth to follow through”. Margalit adds that the industry as a whole is still searching for an operating model for a hands-on international venture capital fund.

Meanwhile, investors seem more than content with the JVP model. Limited partners in the third fund include, from the US, Horsley Bridge (in its first Israeli investment), MIT Endowment Fund, Flag and Merrill Lynch and France Telecom, Electricit de France, Reuters, AXA Insurance, Partners Group and Access Capital Partners. Margalit reports that some two thirds of the fund was drawn from investors new to JVP. The fund was substantially oversubscribed but JVP was adamant regarding the $150 million cap level. A parallel $10 million entrepreneurs’ fund’ boosts JVP’s total to the $160 million mark.