Nokia Ventures Looks Outside of Itself

With increasing entrepreneurial skepticism about the intentions of traditional corporate VCs, Nokia Ventures looks as if it is ready to begin taking baby steps away from the shadow of its corporate parent. Although the firm is not quite ready to stop feeding the business interests of its namesake, it has decided to begin prepping a $450 million fund that will incorporate a number of third-party limited partners.

“Nokia gets an early antenna on new trends, new markets and new business models, but the fund is independent to chase markets wherever they are, regardless of where corporate strategy is,” said Nokia Ventures Partner John Gardner at last week’s Private Equity Investing in Broadband and Wireless conference, hosted by International Business Forum in Boston.

The firm has not revealed when it expects a final close and remains mum on the names of strategic investors that will join Nokia Corp. as limited partners. Still, the new fund’s investment strategy will continue to mirror the Finnish wireless and wire-line telecommunications equipment and service provider’s interests.

“Our expertise is complementary to where Nokia is,” Gardner said.

The new fund will triple the size of Nokia Ventures’ first fund, a $150 million play raised in 1998 in which Nokia Corp. was the sole limited partner.

To date, the existing vehicle has committed about $100 million to 25 portfolio companies, with average investments coming in at $4 million. Many are Internet plays with wireless complements to their core businesses like Redwood City, Calif.-based information manager NetSanity or Helsinki, Finland’s Riot Entertainment, a developer of wireless and online games and entertainment.

The fund has also invested in Internet applications like music search platform MongoMusic, based in Redwood City, Calif., and in enabling technologies like Mainsail Networks’ voice, video and data exchange platform headquartered in Fremont, Calif.

With headquarters in Menlo Park, Calif., and satellite offices in Washington, D.C, London, and at corporate headquarters in Helsinki, Finland, the firm has scouted opportunities across the globe, but concentrated its investments heavily in California and along the East Coast, venturing into only four offshore plays. The new fund will maintain the firm’s geographic disbursement.

Nokia is an early-stage player. Through its new fund, the firm will continue to take a minority position in its portfolio companies, asking for slightly more than 20% of the company for an average of $4 million to $6 million.

The second venture, like the first, will also take board seats in its portfolio companies and lead or co-lead its deals.