With gun-shy investors grumbling about how hard it has become to find a decent deal, a new research-centric investment bank has recently been formed to help sort through the private market clutter. The San Francisco-based firm, which will be officially unveiled today, is named Rutberg & Co. and was founded by Brian Rutberg, previously executive director and head of domestic Internet investment banking at UBS Warburg.
Not only will the group provide extensive reports to VCs on what it considers to be the top private companies in such sectors as wireless, nanotechnology and Internet infrastructure, but it will also act as a placement agent for later-stage deals worth $10 million to $20 million. The firm does not plan to manage initial public offerings so as to remove the back-scratching stigma often associated with I-banking private placement arms.
“We?re on the cusp of starting to publish research, but we can?t do the syndication piece until we get our broker-dealer license, which will probably happen in the next month or so,” Rutberg said. “I?d say the [first deals] will happen sometime around November or December.”
Rutberg & Co., which will receive cash and warrants for its syndication work, does not have any current plans to form an investment vehicle, although it is raising capital from high-net-worth individuals so it can afford to hire additional staffers.
“On the banking side, the amount of talent available out there right now is tremendous, and they are hungry,” Rutberg said. Any new bankers, however, will need to be based out of San Francisco, as Rutberg said any eventual expansion plans would probably take the firm to Boston, rather than to New York.
While a market downturn may seem a curious time to launch any new business, let alone one that deals directly with the venture capital industry, Rutberg is convinced that such troubles will play directly into his firm?s favor.
“When companies have retained [placement agents] over the past few years, it?s often been viewed as a sign of weakness by VCs,” Rutberg said. “Now that it?s gotten so hard to raise money, that?s no longer the case, and VCs will see our involvement as advantageous because of all the research we can provide them.”Rutberg added that he expects VCs to become more and more comfortable with the concept of outsourced syndication, just as they have with outsourced legal and HR services.
It is important to note, however, that the idea for Rutberg & Co. was sparked during the waning days of the dotcom boom, when UBS Warburg was managing a $50 million private placement for online shopping portal Dealtime Ltd. It was one of the first private equity offerings transacted by UBS? Internet group and, while successful, it left Rutberg feeling that the process would be more efficient in a different environment.
“Warburg just wasn?t really structured to be in the private placement business,” Rutberg said. “But I just thought it was a fantastic and efficient business to be in.”
Contact Dan Primack: Daniel.Primack@tfn.com