RWI reaches halfway mark with close of second fund

Six-year-old RWI Ventures is halfway toward completing the close of its second fund, according to a recent regulatory filing with the Securities and Exchange Commission. The Menlo Park, Calif.-based early stage firm has raised nearly $52 million of its targeted $100 million fund from 24 investors.

The fund is on par with the firm’s previous vehicle. In 2000, RWO closed fund I with $103 million in commitments and, according to Thomson Financial (publisher of VCJ), backed 19 startups in networking, semiconductors, software and life sciences.

Among the limited partners in fund II are St. Paul Teachers’ Retirement Association and Teton Capital Co.

None of the firm’s three managing partners—Donald Lucas, Mark Foley and William “Bill” Baumel—returned a request for comment.

RWI has seen three of its portfolio companies go public, including San Jose, Calif.-based software provider PDF Solutions, which launched a $54 million IPO in 2001 after raising a little more than $10 million from RWI, Telos Venture Partners, U.S. Venture Partners and other investors. Its market cap on that day was $336 million and it remains roughly the same now.

DexCom, a company that makes glucose monitoring systems for diabetes patients, did less for RWI when it went public last year. It raised $74.5 million from 11 firms over four funding rounds (RWI contributed to its third and fourth rounds), but it pulled in just about $55 million on the day of its 2005 IPO. Its stock has been on a rollercoaster, trading at a low of about $9 a share and a high of $26 a share within the last year.

Another IPO liquidity was for Vimicro International, a Chinese company that makes processors for digital cameras and whose stock opened at $10 a share share on the Nasdaq last November. Vimicro, which raised $87 million in its offering, had raised less than $25 million in financing from RWI, Capital Group, Fujitsu Microelectronics and General Atlantic. (Baumel led the deal and travels frequently to China on behalf of RWI.)

The firm also has had at least one of its companies acquired. Alameda, Calif.-based Softface, a developer of online search technology for e-commerce, was bought by Ariba for $8 million in 2004. The company had raised about $18 million from RWI, Telos Venture Partners and Norwest Venture Partners.

On the downside, at least two of its companies have gone out of business, including Arista Networks, a Santa Clara, Calif.-based developer of wavelength management solutions (which raised $7 million from RWI and Prism Venture Partners), and Xporta Inc., a Santa Clara, Calif.-based software developer (which raised about $19 million from RWI and Prism).

That RWI is back for fund II isn’t surprising. Though the firm’s track record lacks the sorts of home runs that LPs like to see, it’s none too shabby for a first-time fund, particularly given its vintage year. Plus, one of its founders, Donald A. Lucas, can make the rare claim of being a second-generation venture capitalist, one whose father, Donald L. Lucas, is well-respected, and connected, within the community. The senior Lucas—who was a special limited partner in fund I—participated in the founding of National Semiconductor in the late 1950s.

Lucas and his son have co-invested in a number of profitable deals, including in Khimetrics, a startup that developed dynamic pricing software and was acquired in 1997 by SAP for $175 million. That company raised about $15 million. Father and son have also co-invested in Macromedia, Intuitive Surgical and Coulter Pharmaceutical.

Profile: RWI Ventures
Founded: 1995
Headquarters: Menlo Park, Calif.
Fund: RWI Ventures II
Target: $100M. The firm has raised about $52M, based on its last filing.
Previous Fund. The firm raised $103M for fund I in 2003.
LPs: St. Paul Teacher’s Retirement Association and Teton Capital Co.
Management: Led by founder and Managing Director Don Lucas and Managing Directors Mark Foley and William Baumel.
Focus: Invests in networking, semiconductors, software and life science startups.