Salomon Smith Barney Venture Services LLC is raising its fifth fund-of-funds, Venture Opportunities III. Andy Chase, president of SSB Ventures, indicated that the group began seeking investments in November and projects a close in January 2001.
As of November 12, the fund had hard circle commitments for about half of the $200 million targeted amount. He said the vehicle is expected to invest in 12 to 13 venture capital funds, preferably from established firms.
“We’re mostly looking for funds with a Roman numeral six, seven, eight or nine behind them,” he said. While he is flexible, Chase said he’s most confident in a company when at least part of the management has had experience in tight venture capital markets.
“We are looking for funds that have partners who were managing money in the late 80’s, or even the early 90’s,” he said.
SSB Ventures is building a portfolio of VC funds primarily focusing on information technology and communications technology. The portfolio’s strongest geographic presence is in California, and the investment styles lean toward early-stage companies – although Chase did say that both geographic and stage diversity is important.
Chase said the fund has already targeted 11 of the firms in which it will invest. He said he likes to make equal investments into each fund with an average investment of $15 million.
Ameritech Development Corp., ComVentures, Draper Fisher Jurvetson, InterWest Partners, Menlo Ventures, New Enterprise Associates, Redpoint Ventures, Sierra Ventures, Softbank Technology Ventures, Spectrum Equity Investors and TA Associates have all been targeted as investments for the fund.
“We’re looking for VCs who build companies rather [than] spin companies or spin stocks,” Chase said. He added that he was also interested in VC firms with partners who have had practical experience in engineering and technology outside of VC.
“One common thread [of the VCs in our portfolio] is that most have a strong communications practice,” Chase said. He said that included experience with integrated circuit technology, applications and next generation services – “the whole food chain from silicon to services.”
How Do We Get There from Here?
When considering a potential investment, SSB Ventures’ due diligence team considers the prospective VC firm’s reputation. Chase said the team speaks with other VC firms, and calls entrepreneurs the VC has backed.
“Every entrepreneur thinks they have another start-up in them. I ask them: Would this VC be their first call?” Chase said.
SSB Ventures is a division of Salomon Smith Barney Inc.’s alternative investment services, a group of investment vehicles offered through its financial consultants. To date, SSB Ventures’ funds-of-funds have been supported by individuals and other clients of the firm’s private client group.
SSB Ventures shares research with other divisions of Citigroup Inc., and Chase has asked several executives from other areas of the financial conglomerate to sit on an investment advisory committee for the fund. He said other divisions within Citigroup would also occasionally co-invest with SSB Ventures.