If you’re one of the public LPs booted from Austin Venture’s latest fund last week (see story, page 1), Origin Partners wants you to know that you’re more than welcome in its next fund.
The emerging manager has commitments for about one-third of a targeted $100 million second fund, and it’s actively looking for new LPs, particularly state pension funds.
“They are being frozen out of a lot of larger funds, but we have no issues with reporting our returns,” says Scott Jones, a managing partner and head of Origin’s office in Bridgewater, N.J. “We’re going to need some larger investors to participate [in Fund II] to reach our goal, and we are in discussions with a number of state pension funds.”
A selling point for Origin is that it is among the minority of vintage 2000 funds that are above water. Its inaugural fund, a $55 million vehicle, boasts one exit from the 11 companies it backed. Sun Microsystems purchased Origin’s portfolio company Waveset Technologies for about $150 million in 2003, giving Fund I a return of 3.2X on its investment, Jones says.
Origin is an early stage investor that focuses on communications, information technology and medical technology. It held a first close of $18.8 million on Fund II this month, and it has commitments for about twice that amount, Jones says. He declined to name any of the LPs other than TIF Ventures, which is run by the Government of Singapore and which was the lead investor in Origin’s first fund. TIF is among the largest investors in the second.
The firm expects its second fund to have the same makeup of LPs as its first, with about one-third of the capital coming from Asia, one-third from the United States and one-third from Europe and the Middle East. The LPs in Fund I were primarily corporations, institutions, large family offices and CEOs, Jones says.
Origin hopes to hold a second close by mid-year for Fund II and a final close by year-end. Says Jones: “We have a list of over 70 investors that we’re in touch with and a fairly good number of them are in due diligence for the next close.”
Besides Jones, the firm’s managing partners are Jim Hutchens, who heads Origin’s office in Natick, Mass.; and Marc Yagjian, who is responsible for its office in Austin, Texas. The trio is looking to bring on two senior partners. “We [the GPs] are in the 50-year-old age class, so we’re seeking people who are active investors to help with our second fund and help us raise money for Fund III and run it,” Jones says.
No strategy change is planned for Fund II. The goal of Fund I was to invest in 12 companies, putting about $1 million to $1.5 million in each, while setting aside about two to three times those amounts for follow-on. The plan for Fund II is to invest about $3 million to $5 million per deal, allowing Origin to buy a position of 20% to 30% in each company.
“Valuations are at a decade low for early stage, and it’s a perfect time because roughly half the investors in early stage have dropped out,” he says. He notes that the last two deals that Origin has funded were valued at $5 million pre-money and that two of those companies already had products and one of them had customers.