Like a larger-than-average newborn, Newbury Ventures? third fund ended up much bigger than expected after a nine-month gestation period. Still, the firm?s fund-raising labor was relatively painless, despite the fact that it busted its original target by a wide margin, said Jay Morrison, a managing partner with the San Francisco-based firm.
Healthier-than-anticipated investor interest pushed Fund III?s final cap to $250 million from $175 million and, when all was said and done, Newbury Ventures actually turned away an additional $30 million of commitments from existing investors, he added. The fund held its first close last fall, and followed up with a final close last month.
“We had established a hard ceiling of $250 [million] that we did not want to go over and a number of our investors did not want us to go over,” Morrison explained. “We wanted to be at the upper end of what?s considered a small fund so we would have the flexibility to make the kinds of investments that have generated the track record that?s allowed us to generate this kind of interest to begin with.”
Indeed, most of the firm?s new backers came on board at the behest of limited partners from Newbury Ventures? previous two vehicles. The fund?s prestigious investor roster includes Alliance Capital Management, Allianz Private Equity, BancBoston, Bank K. Vontobel, Bell Canada, Dresdner Kleinwort Benson, GE Capital, The Hearst Foundation, Silicon Valley Bank and The University of North Carolina.
Part of the reason that Fund III may have engendered so much interest is because Newbury Ventures has not strayed from the tried-and-true strategy of its two earlier funds, which focused on investing in early-stage communications plays. In fact, Morrison characterized the firm?s third fund as a continuation of its predecessors in that it will concentrate primarily on start-up communications infrastructure firms that run the gamut from the semiconductor component or device level to the optical and wireless networking arenas. In general, the firm plans to steer clear of pure service provider plays, Morrison said.
Like Fund II, approximately half of Newbury Ventures? third vehicle will invest in companies outside the U.S., with special emphases on Europe, Israel and Canada. To that end, the firm plans to set up shop shortly in Ottawa to better ferret out Canadian deal flow. To help speed that process, the firm has signed on two new partners with ample experience in the communications space who will mostly be responsible for seeking out opportunistic investments in Canada.
Currently, the firm has offices in California and France.
On average, Newbury Ventures intends to pump about $10 million into each of its portfolio companies up front, injecting them with additional capital in follow-on rounds. “We review our whole portfolio regularly on a deal-by-deal basis,” Morrison noted. “We add up what we need to reserve for the companies we?ve made investments in and re-evaluate [those numbers] as we go along.”
When the firm closes what is expected to be a three-year investment window, Fund III will likely have 25 portfolio companies, he added.
It?s already brought a few inaugural firms into the fold. Its first offshore deal was a co-investment in a French network access components supplier called LEA, alongside Innovacom, the VC arm of France Telecom. It also has backed two U.S.-based companies: Telespree, a wireless equipment vendor, and gigabit ethernet play Silicon Packets.
Contact Robyn Kurdek.