USVP Raises $600M for Fund 9

U.S. Venture Partners (USVP) closed its ninth fund last week, with $600 million in limited partner commitments, making it one of the largest venture funds raised this year.

But not included among the investors were public institutions that USVP felt would be subject to Freedom of Information Acts (FOIA) requests.

“We obviously wanted to respect the desires of existing limited partners, but we had to make some tough decisions with certain funds because of FOIA requests,” says Steve Krausz, a general partner with USVP. “By and large we decided that if an LP had FOIA exposure, we were not going to take them into the fund.”

Among those not re-invited were the California Public Employees’ Retirement System, the State of Washington Investment Board and the Virginia Retirement System.

However, USVP did allow certain public groups to participate, so long as they were exempt from FOIA, because of local legislation.

Many observers say that legislation is the only way to protect public pension funds. Concerns that public pension funds would be forced to disclose the value and performance of their private equity portfolios to the general public have caused some top-performing funds to lock those investors out of their most recent funds.

For instance, Charles River Ventures and Sevin Rosen Funds blocked public institutions from investing in their respective fund-raising efforts earlier this year because institutional investors could not guarantee that fund returns would remain confidential.

But although some firms are avoiding certain public LPs because of issues pertaining to disclosure of their investments, fund-raising hasn’t slowed down.

Battery Ventures recently closed its seventh fund at $450 million, having rejected a handful of commitments from repeat investors.

One of the rejected LPs was a public pension system that had acceded to FOIA. Battery, which had to whittle down about $2.25 billion in proposed LP commitments, says that the FOIA issue was not why that investor was rejected from the new fund.

Similarly, USVP had little trouble receiving commitments for $600 million in a short amount of time. Fund-raising for USVP IX began on Sept. 1 with a $600 million target, which was calculated based on average deal-flow over the past three years.

Approximately $150 million of the fund is earmarked for investments in medical technology companies, with the remainder going to the information technology space.

This percentage breakdown mirrors USVP VIII, which was closed with $1.01 billion in early 2001, but later was reduced to $750 million.

“We’ve always been a diversified firm with both IT and med-tech investments, and we expect that it will continue,” Krausz says.

To invest its newfound money, Menlo Park, Calif.-based USVP has made a handful of personnel moves. The most notable is the hiring of Chris Rust as a general partner. Rust is the former co-founder and CEO of Mahi Networks Inc. and, before that, served as a partner with Sequoia Capital.

Also joining USVP is Casper de Clercq, a longtime med-tech executive who will become the firm’s fourth venture partner.

Meanwhile, onetime venture partners Paul Matteucci and Arati Prabhaker have each been promoted to the position of partner.

USVP’s fund is one of the largest VC funds raised this year. In September, InterWest Partners closed its ninth fund ($600 million), which included commitments from public LPs, such as the California State Teachers’ Retirement System.

Other sizable venture funds raised this year were Battery Ventures, which closed its seventh fund ($450 million), Essex Woodlands Health Ventures’ sixth fund ($400 million) and Benchmark Capital’s fifth fund ($400 million).