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St. Paul Baptizes $1.3B VC Vehicle

Apparently an NHL franchise isn’t the only new thing to arrive in Minnesota this month.

Following a quintet of early-stage venture vehicles, the last of which was capped out at $750 million, St. Paul Venture Capital recently broke through the mega-fund barrier by securing $1.3 billion from sole limited partner St. Paul Fire and Marine Insurance Co.

“Considering how much capital we were looking for, when we presented [St. Paul Fire] with our strategy, we offered to also go to outside investors,” said Patrick Hopf, founder and managing general partner with St. Paul Venture Capital. “But they made their decision to stay our exclusive LP in about 15 minutes.”

The additional capital will not only help the private equity firm participate more forcefully in the continuing spate of mammoth deals for IT and telecom infrastructure start-ups, but it will also provide greater flexibility in terms of engaging in private-into-public-equity (PIPE) transactions. The firm had previously considered such deals – especially in previous portfolio companies – but generally refrained due to capital restrictions.

“We’ll put about $135 million [of the $1.3 billion] into those types of deals,” Hopf said.

In terms of geographic focus, not much will change except for a little added emphasis on New England. Currently, the firm also invests in California and around its Midwestern base.

“We invest around 40% on each coast with the rest being put around here,” said Michael Gorman, general partner with St. Paul Venture Partners, from his Eden Prairie, Minn.-based office.

In related news, the firm is still in the midst of setting up its seventh satellite fund to focus on early-stage investing around Boston and New Hampshire. It closed on its sixth effort – the $15 million Minnesota-based Quatris Fund – in the middle of last month.

Lastly, the firm plans a number of new management hires in conjunction with the $1.3 billion general fund and a new entrepreneurial side fund that is currently being raised.