SAN FRANCISCO – Despite the troubles some of its corporate limited partners are having in the public markets, Allegis Capital is back in the fund-raising business with the fourth member of its media technology fund family.
Allegis Capital’s model is based on leveraging the resources of corporate investors into its portfolio so as to mitigate risk and build companies. And as the softness and volatility in the public markets spill into the private equity market, the firm is betting on those strategic alignments to cushion any potential hits.
“As a venture capital firm, what do you do to mitigate the risk?” asked Robert Ackerman, co-founder and general partner of the firm. “The strategic linkages to major corporations create a net under portfolio companies that provides the portfolio companies with the resources and partnerships to weather a turbulent capital environment.”
Thirty corporations will come on as LPs. Many – American Express Co., Hallmark Cards Inc., Motorola Inc., NBC Inc. and Sun Microsystems Inc. – are repeat investors in Allegis’ Media Technology Venture funds, however; for the first time, Allegis will add a handful of traditional institutional investors to its list of LPs. A number of new corporate investors are also expected to come on board.
Corporate partners, Ackerman said, are resource and labor-intensive relationships. By adding traditional institutional investors to the new fund, Allegis can maintain its geographic and strategic reach and grow its pool of capital without diluting its own internal resources. Still, the firm will name new general partners to manage the fund once it holds a final close. Global Crossing Ltd. Chief Executive Leo Hindery will come on board as a venture partner.
A first close of $100 million was expected last month. Fund raising will end in January, when the vehicle caps out around $400 million. The fourth fund will outsize its predecessors by about $235 million, allowing it to invest up to $15 million in each portfolio company, and maintain its percentage ownership over the life of each investment. At the same time, it will preserve its family of funds’ focus on the convergence of computers, content, communications and commerce. Specifically, it will target early-stage technology plays whose strategies can be aligned with Allegis’ corporate partners.
“There’s a strong correlation between the portfolio we’ve built and the ability of our corporate partners to bring value to portfolio companies,” Ackerman said. “With access to a corporation’s resources, the portfolio company can lower its capital requirements, accelerate growth, open new markets and erect barriers to competition.”
About 80% of portfolio companies in Allegis’ Media Technology Ventures family of funds have received follow-on direct investments from corporate LPs, he said. Corporate LPs in the new fund, like in all of the MTV funds, will also provide deal flow, due diligence, and strategy to the fund.