NeSBIC Readies To Slash Internet Fund

In light of the dotcom bust, Dutch private equity firm NeSBIC, has made a proposal to reduce the size of its Converging Technologies & e-Commerce Fund (NeSBIC CTe Fund), which was launched during the good times of 2000. The fund originally closed on $256.6 million, $98.7 million above its target, but will now scaled back to $140.3 million, says managing general partner Robert Wilhelm, adding that the fund is closer to its original target of $148 million.

If the fund is reduced, it will be the second largest reduction this year. Charles River Ventures cut its fund by 63% in May. At the same time, Austin Ventures cut its fund by 45%. NeSBIC’s is talking about cutting its fund by 45.3%.

If the cut does happen, NeSBIC will follow in the path of a handful of firms in the U.S. and in Europe that have recently slashed funds or reduced management fees following a lack of investment opportunity and under-performing portfolios. In total, 15 firms have made fund cuts this year.

Investors in NeSBIC CTe Fund, including insurer Fortis, which provided a $49 million commitment, are expected to approve the fund reduction in the coming weeks. Additionally, the fund will not make any new investments and will concentrate on nurturing its portfolio of 16 companies.

“We have decided to do this as we feel it is right for our investors. The opportunities are not as great as we expected them to be at the time of the fund’s launch. We have sufficient funds to continue to support the portfolio, but we won’t be making any new investments,” says Wilhelm.

While the fund had a stronger focus on e-commerce than NeSBIC’s previous funds, it also focused on communications services and enabling IT technologies. One company facing difficulties in CTe Fund’s portfolio is Swedish online retailer, which managed to bounce back from the brink of bankruptcy earlier this year with a $3.9 million round of funding. Not so lucky was Twest, a provider of interactive Web applications, which closed down due to a lack of funds.