Hampered by both a market downturn and possible LP separation anxiety on the part of potential limited partners, Wasserstein & Co. recently closed out its second venture capital vehicle with $160 million, far short of the $200 million to $250 million it had initially targeted. The firm, which was spun out of investment bank Wasserstein Parella & Co. late last year, is legally required to keep Wasserstein Ventures II (WV II) open for another four months, but will no longer conduct any active marketing efforts.
The fund had actually launched prior to the spinout, and had even received some commitments.
“When we were spun out, our world changed completely because we were completely independent of the investment bank,” said Townsend Ziebold, president of Wasserstein Ventures. “It certainly caused us to re-orient some of the limiteds as to how we were structured.”
Indeed, the loss of their former investment banking resources led Ziebold and company to be far more focused when it came to formulating WV II’s investment strategy. Unlike the $135 million stage-agnostic Wasserstein Ventures I, Fund II is strictly an early-stage play, making average Series A investments of between $1 million to $3 million, with a total of $7 million to $8 million committed over the life of a portfolio company.
It will also narrow its industry focus a bit by concentrating on networking and communications companies that specialize in such niches as semiconductors, digital media and infrastructure components.
“In our last fund, we had a few apples fall far from the tree in terms of an e-commerce deal [Drinks.com] and the like, but we’re pleased with most of what we did,” Ziebold said.
The new vehicle’s first commitment, in an unspecified tech company, is expected to be announced tomorrow.
Approximately 20% of the new fund’s capital is provided by the partners themselves, while most of the new outside money came from one major institutional investor and a handful of high-net-worth individuals. Wasserstein Ventures currently has seven investment professionals working out of its New York and Palo Alto, Calif. offices, and plans to hire one more in the coming months.
WV II was sold with a 20% carried interest structure.