While the fevered venture fund-raising pitch of 1999 and 2000 has died down, a few firms are still out there pounding the pavement.
Take early-stage investor OVP Venture Partners, which last week held a $160 million initial close on its largest fund to date, OVP VI. Targeted at $200 million, the new fund, along with a companion vehicle for entrepreneurs, is expected to close in March.
Called OVP VI Entrepreneurs Fund, the side vehicle is designed to enable the firm to tap into the angel network in its home territory, the Pacific Northwest.
“These are people that are going to have money in the deal anyway, and [the fund] gives them a reason to show it to us before it gets its first round of angel money,” said Gerry Langeler, a general partner with OVP. “We like to be in those deals coincident with angels.”
The entrepreneurs side fund will likely account for about 5% to 10% of the commitments in OVP VI, or $5 million to $10 million if the fund reaches its $200 million target.
So far, it seems to be on track to do so. Nearly all of OVP’s existing limited partners re-upped in OVP VI, including the Washington State Investment Board, Nationwide Insurance, Silver Ventures, Dow Chemical Pension, Kenyon College Endowment, Meyer Memorial Trust, NOX Technologies, Comerica and Silicon Valley Bank.
Additionally, OVP’s three largest investors – the Oregon Public Employees Retirement Fund, Washington Public Employees Retirement System and Western Metal Industry Pension – anted up combined commitments of $120 million, up from the $61.5 million they jointly pumped into the $150 million OVP V 18 months ago.
Additionally, two new investors joined OVP’s cadre of LPs in Fund VI, California Public Employees Retirement System (CalPERS), represented by Grove Street Advisors, and the University of Indiana Endowment.
OVP plans to woo a number of new potential backers before holding a final close six months from now, Langeler said.
Part of the reason it has built in extra time for the second close is because the current fund-raising environment is drastically different than it was when OVP went out to raise Fund V in late 1999 and early 2000, he added.
“Last time, we had two closings within two days of each other, and that was just to get all the signatures we needed,” Langeler explained.
This time around, however, OVP encountered a few investors who were way over their private equity allocations. Additionally, some new LPs who had considered investing in the fund would not put up their commitments until they had seen what kind of support OVP received from its existing backers, Langeler said.
While it may have to jump through hoops in order to raise capital these days, OVP intends not to stray far from its early-stage strategy. As before, OVP VI will invest mostly in information technology, software and communications infrastructure companies, with some biotechnology plays thrown into the mix.
With offices in Kirkland, Wash., and Lake Oswego, Ore., OVP plans to invest approximately 80% of the new fund in companies located in the Pacific Northwest.
Moreover, the firm intends to make initial contributions of between $1 million and $5 million, and pump about $8 million to $10 million into its portfolio companies over the life of the investment. OVP VI is expected to back between 15 and 20 companies over the next three years.
Software Is Back In The Saddle
The firm is currently putting the final touches on an early-stage financing for an undisclosed enterprise software company.
“For a while, people forgot about software because you could create an Internet company without doing complex software work. Software became passe,” Langeler said. “Now it’s back with a vengeance. In fact, the Internet companies we invested in that survived the [dotcom] bloodbath all offer software technology people can appreciate.”
OVP’s portfolio of 70-plus companies includes Portland, Ore.-based 800.com Inc., a consumer electronics direct marketer; AskMe Corp., a knowledge management software company in Seattle; Mercer Island, Wash.-based legal management solutions provider Elf Technologies Inc.; and SafeHarbor Technology Corp., a customer support services firm in Satsop, Wash.
In addition to Langeler, OVP VI will be managed by the firm’s four other general partners: Dave Chen, Bill Miller, Chad Waite and George Clute, who is also a special limited partner in the fund.
The firm has no immediate plans to hire any additional staff, but there may soon be room for another partner, as Clute is “retiring slowly,” Langeler said.
Moreover, OVP has a store of dry powder left to invest, as Fund V still has reserves remaining for follow-on financings. OVP IV is almost fully invested, Langeler said.
Founded in 1983, OVP currently has more than $475 million worth of committed capital under management.
Robyn Kurdek can be contacted at Robyn.Kurdek@tfn.com