Technology Crossover Ventures (TCV), the Palo Alto, Calif.-based firm that funded Expedia and Netflix Inc. before their IPOs, last week closed its fifth fund with $900 million.
This fund is half the size of the vehicle that came before it – a $1.7 billion fund TCV raised in 1999. The firm will invest TCV V the same way as it did with the predecessor fund, the same market segments and the same investment strategy. But some things at TCV have changed.
Similar to other firms that have raised smaller funds during the last few months, TCV has trimmed its payroll: There are now eight general partners at TCV, down from the 10 that managed TCV IV.
Carla Newell and Mike Linnert are no longer with the firm. TCV has also added one venture partner and one entrepreneur-in-residence to its investment team.
TCV V will invest in software, technology services, systems and semiconductor companies. It will be looking especially close at deals that tap into spam management, network security, and telecommunications systems technologies. It will also invest in business process outsourcing deals.
TCV V will fund later-stage and expansion stage companies, reserving some capital for PIPE deals. In TCV IV, the firm just last month helped rescue the bankrupt Redback Networks with a $30 million PIPE deal.
TCV expects to do the first investment with TCV V sometime in the first half of this year.
It will invest up to $25 million in each portfolio company. TCV expects to have up to 35 companies in its portfolio once the fund is fully invested.
Also, the firm will invest in a company before it goes public, during its IPO, and once it is a public company – that’s what “Crossover” stands for in TCV.
“That’s the approach that’s worked for us, and we’re going to stick to it,” says general partner Jim Drew.
The firm’s $417 million 1999 fund, TCV III, posted a net IRR of 17.10%, according to the California Public Employees’ Retirement System, a limited partner in the fund. TCV IV, a $1.7 billion fund closed in 1999, has returned 0.60% to its investors.
In addition to CalPERS – which is an investor through its partnership with Grove Street Partners – limited partners in the fund include BancBoston Capital, General Motors Corp., Hewlett-Packard Co., New Mexico State Investment Council and Rho Management Co.
Founded in 1995, TCV manages $3.3 billion and has made investments in 140 companies.