VC Heavyweight Launches Growth Fund

Jeff Drazan, former managing director at Sierra Ventures, is moving away from the venture capital space in which he built his name. He has launched a new growth capital firm called Bertram and closed its debut fund Bertram Growth Capital I, taking in $250 million in LP commitments.

Without naming his investors, Drazan told Buyouts, “It’s a pretty even mix of institutional LPs,” which include a pension fund, an endowment, a foundation, an insurance company and an investment advisory firm. “The hardest part was helping the LPs understand our model. At first many of them told us that they couldn’t invest because we didn’t fit in one of their two buckets, private equity of venture capital.”

Bertram it turns out, is neither. Instead the firm is finding a niche in between pure venture and pure buyout. Drazan describes that the firm is a growth capital investor that will place $25 million apiece in ten well-established companies that have revenues of $20 million to $40 million and are at breakeven, but stalled in their path to further growth. Bertram’s investment scope runs from minority investments with strong rights to control investments.

Similarly, the new firm has a pretty broad investment scope, with a sector focus that includes healthcare and healthcare services, industrial manufacturing, and Internet companies.

Asked to provide a model for his firm, Drazan points to “TA Associates and Summit Partners in their early days,” and to firms like The Riverside Co. in Cleveland or Stone Arch in Minneapolis—firms he describes that are aiming at mid- to low-cap investments and plan to add value not through financial leverage, but by building portfolio companies and their revenues.

Drazen founded the new fund alongside his brother, Ken, an accomplished hepatic surgeon. The announcement comes complete with a first group of four investment professionals who will be vice presidents at Betram including, Mike Chang (formerly of Apax Partners), Jared Ruger (formerly Oak Hill Capital Management, Draper Fisher Jurvetson), Joe Tou (formerly Intel, Selectronics) and Ryan Craig (formerly of HealthNet). There are six more VPs to follow but the current team is already preparing for the firm’s first investments.

While it’s rare that private equity groups will announce a firm formation alongside a new, fully raised fund, Drazan described that the process “wasn’t all that quick.”

However, outwardly it would appear he is just being humble. Bertram sent out its first PPM in June, and closed on $250 million in early August, just two months later. Pushed for details on how he raised the money so quickly, Drazan passed on the opportunity to polish an impressive investment track record in public and instead disclosed, “We only have 15 LPs in the fund.”

The move away from venture capital comes at a time that Drazan believes the market has become overcrowded. He is convinced that the deluge of me-too strategies in the VC space will crush many entrants, outside of the three dozen or so perennial VC winners that includes his past firm, Sierra.

Asked what he enjoys most about having a new life after 22 years in venture capital he says simply, “the clean slate on the wall.”

Drazan remains a managing director for Sierra Ventures funds V through VIII, sits on four boards of directors for the firm and is the chairman of the board for three of Sierra’s portfolio companies. —J.B.