LPs Try To Squeeze Into Sevin Rosen Fund

Sevin Rosen Funds last week closed its ninth venture capital fund with $300 million in limited partner commitments. But if limited partners had their way, the fund would have been two to three times larger.

John Jaggers, a general partner with Sevin Rosen since 1988, says that he never before has seen such intense interest from new investors. “There is so much money out there right now that it’s getting scary. It almost makes me feel that we could be heading into another cycle like we saw a few years ago.”

The firm received more than $600 million in requested commitments from returning LPs alone. Rather than succumbing to LP pressure, Sevin Rosen stuck to its original target. It cut out all public and fund-of-funds money and then “spread the pain” among returning investors. Among those not re-invited were the California Public Employees’ Retirement System (CalPERS), Knightsbridge Advisors, the Los Angeles County Employees’ Retirement System (LACERS),and Pomona Capital.

Joining Jaggers as general partners on the new fund are firm veterans Al Scheule, Steve Dominik, Jackie Kimzey, Steve Dow, John Bayless, Dave Shrigley and Nick Sturiale (recently promoted to GP). John Oxaal and Dave McLean also will serve as general partners, after having joined the firm earlier this year. The new fund also features partners Ram Veldi and Amra Tareen.

Sevin Rosen-which has offices in Dallas, Austin, Menlo Park and San Diego-plans to maintain its investment strategy of early-stage funding for information technology companies. It also does the spare life sciences deal, such as Cytokinetics Inc. (Nasdaq: CYTK), which went public in April and was trading up 9.2% as of market close last Wednesday. Its other recent exits include the February acquisition of Trulogica Inc. by Hewlett-Packard & Co. (NYSE: HPQ), and the January acquisition of Cicada Semiconductor Inc. by Vitesse Semiconductor Corp. (Nasdaq: VTSS).

Sevin Rosen will not start investing the new fund until this fall, as SRF VIII still has enough dry powder to make a small handful of new investments.

SRF VIII was an $875 million fund when it was raised in 2000, but the firm later told investors that it would not call down the final $275 million.

According to a CalPERS portfolio performance report, SRF VIII had a net IRR of -28.5% as of Dec. 31, 2003.