Historically supported by well-to-do families from both the U.S. and abroad, New York-based Rho Ventures kicked off Rho Ventures IV LP last summer with an initial target of $400 million. As of the end of September, however, its existing LPs had put up $225 million for the fund?s first close and Rho decided to reach out to institutional backers to make up the difference. When all was said and done late last month, the fund netted $435 million.
“We?ve always worked with families, but we?ve grown to a size now that it was a natural extension for us to talk with the institutional market,” explained Mark Leschly, a general partner with Rho. “They tend to do asset allocations, they tend to be repeat investors and they tend to invest more than families.”
For now, Rho is keeping the identities of its new LPs under wraps, but Leschly said they include pension funds, financial institutions, insurance companies and other institutional players from both Europe and the U.S.
A Warm Reception
Although the firm?s institutional relationships are still relatively new, Leschly said it was surprisingly easy for Rho to raise its latest fund.
“There certainly were groups out there that were reluctant to entertain new [VC] groups,” he said. “Anecdotally, we were told that institutions are investing in groups that have been around a long time, have invested through cycles, whose teams are still together and that have generated top-tier returns. We didn?t encounter the difficulties others have.”
Indeed, Rho has been around since 1981 and now has roughly $1 billion under management. Additionally, Leschly and Rho GPs Habib Kairouz and Joshua Ruch have been jointly managing investment vehicles for several years.
Besides the new LPs, Fund IV isn?t much different from Rho?s previous vehicles. It too will invest between $10 million and $15 million over the life of its portfolio companies. What is more, the firm?s investment pace won?t change much either as Fund IV will likely have a two-year investment window and be fully invested with about 25 companies.
Strategy-wise, Rho IV will invest broadly in health-care plays, but it won?t stray entirely from the firm?s previous interests in the information technology and telecommunications sectors. As with prior vehicles, however, the fund will be mostly stage-agnostic.
The fund has already invested in four companies to date, including long-haul optical networking play Xtera Communications Inc., application service provider IntraLinks Inc., imaging technology company Applied Science Fiction and proteomics chip maker Archemix.
Previously, Rho has invested in such high-fliers as Ciena Corp., Active Power, Copper Mountain Inc., Human Genome Sciences Inc. and Tripod, which it sold last year to Lycos Inc.
The $183 million Rho Ventures III, which closed in May 1999, has plenty of dry powder left for follow-on financings, but won?t make any new investments, Leschly said.
Robyn Kurdek can be contacted at: Robyn.Kurdek@tfn.com