Vector Capital is just months away from closing its third fund, Buyouts has learned.
The San Francisco-based firm began soliciting limited partner commitments earlier this year, and expects to bust its $250 million target capitalization. It held a $175 million first close in May, and more recently held a second close that pushed the total amount of committed capital over $200 million. Investors on the first close included First Plaza Group Trust (with JPMorgan Chase Bank as trustee), Stichting Pensioenfonds AB and ZAM Holdings LP. CalPERS, which committed $5 million to Vector’s $175 million second fund in 1999, has not yet decided to re-up for Fund III.
One sticking point could be the departure of firm co-founder and former managing director Val Vaden, who previously had co-founded Benchmark Capital. Buyouts reported last November that Vaden would take a senior advisory role with the new fund, which left Alex Slusky as Vector’s only managing partner. Sources close to the firm, however, say that Vaden’s lack of participation has not harmed fund-raising in any way, and that the blow was softened by the recent promotion of Chris Nicholson from principal to partner.
Vector also has benefited from its refusal to stray from its investment strategy, which focuses on buyouts, late-stage investments or financial restructurings of technology companies with annual revenue of between $10 million and $150 million. Its most notable deal of the past year came last summer, when Vector bought out Corel Corp., a publicly-traded software provider, for approximately $63 million. Corel ceased trading on the Nasdaq, following the acquisition.
According to information published on CalPERS’ website, Vector Capital II had not returned any capital to LPs as of Sept. 30, 2003, despite having called down 80% of committed capital. But unlike most vintage 1999 funds, Vector reported a positive internal rate of return (IRR).
Slusky and Vaden co-founded the firm as an independent entity in 1997, although its formation included the absorption of Ziff Brothers Investments. The initial fund was capped at $40 million with the Ziff family as its sole limited partner. Fund II investors included CalPERS, CSFB, GE Equity, J.P. Morgan, Perot Investments, MIT, The MacArthur Foundation and Vulcan Ventures.