A proposed joint venture fund between
Brian Garrett and Rick Smith, former partners at Palomar Ventures, worked with CAA to explore the opportunity to become a DFJ affiliate fund, but jettisoned the concept after determining that a fund of the proposed size would take too long to raise, Garrett told PE Week.
“It was almost entirely macro-economic factors,” Garrett says. “We had taken a pulse of the market. Whether it was with CAA or without CAA, it was going to take a long time to raise a big fund. With the capital markets where they’ve been for a while it’s hard for almost anyone to raise a big fund. We felt we were going to miss too many opportunities if we didn’t put something together as soon as possible.”
Garrett and Smith left Palomar in 2006 and began gauging interest the following year in the CAA and DFJ affiliated project.
Although the fund is not moving forward at this time, DFJ has not ruled out a potential collaboration.
“Our ‘unannounced’ exploration in this area is still a work in process,” says DFJ Managing Director Don Wood, who maintains the DFJ affiliate network.
Garrett and Smith are currently in the midst of raising a digital media seed fund for their Santa Monica, Calif.-based firm called
The firm is turning to high net worth individuals for its fund, including successful entrepreneurs in the Los Angeles area and MySpace co-founder Brett Brewer. A recent regulatory filing also lists Brent Woods as one of 11 investors.
Fund-raising has slowed, Garrett says, as several potential investors with close ties to Wall Street became more conservative in light of the ongoing financial crisis.
Crosscut Ventures has already made three investments, each deal size about $500,000. The firm backed image licensing company GumGum, online document sharing site DocStoc and Verve Wireless, a company building a mobile advertising network for local news outlets.
Although Garrett and Smith had been looking at a much larger fund at the end of 2007, the smaller fund seems to suit the two just fine.
“Without a doubt, it’s the best place to turn $1 into $3 right now,” Garrett says of early stage investing. “There are just not a lot of management fees associated with a small fund. We do well if our investors do well. If they don’t, we’re not buying faster cars and bigger houses.”
The smaller, non-affiliated fund is similar to
The Mail Room Fund is run by Richard Wolpert and typically invests $250,000 in each of its deals.
Garrett says he looks forward to syndicating deals with the Santa Monica, Calif.-based Mail Room Fund, which has so far disclosed one investment. The Mail Room Fund led the seed stage round Los Angeles-based Sometrics. Greycroft Ventures co-invested with Mail Room Fund. —Alexander Haislip