Alsop Louie Partners recently closed its second fund with $98.6 million after a two-year fund-raising effort.
Stewart Alsop, co-founder of the San Francisco-based early stage firm, says that along with the fresh capital, the firm has added three new partners: Joe Addiego, most recently a partner at In-Q-Tel (where firm co-founder Gilman Louie once served as CEO); Bill Coleman, founder of Cassatt Corp. and BEA Systems; and Jim Whims, who was most recently a partner at TechFund Capital.
As of mid-October, Alsop says that the firm has already made seven new investments from its new fund. However, as he has done since he and Louie founded the firm in 2006, he declined to discuss how much the firm has put to work in any of its startups. He would only disclose the names of two of the companies.
Among Fund 2’s investments is Next Big Sound, a Boulder, Colo.-based startup that tracks the popularity of musical artists both online and off. The 2 1/2-year old company has raised $1 million in seed funding, including from angel Jeff Clavier and the Foundry Group.
Alsop Louie also recently backed FrameHawk, a San Francisco-based “Web presence” startup whose technology allows users to tie their desktop applications to mobile platforms, as well as numerous other devices, via any network, from 3G to broadband. Alsop Louie is the firm’s sole investor, Alsop says.
Alsop Louie began raising its second fund in August 2008, just six months before it had finished investing its first, a $75 million fund that closed in 2006. “Our timing was about as bad as it could get,” says Alsop, referring to the financial crisis that gripped the globe beginning in September 2008.
We’re looking at where the world will be three to four years from now. You want to be investing into the next tech cycle, not late into the last one.”
“In 2009, when people were still really shell-shocked, we had many long meetings [with institutional investors], told people what we were doing and what the returns on our fund were, and we’d never hear from them again,” Alsop says. “It was later in the year that people started making up their minds about what to do.”
The firm’s fund-raising process took two years and meant many months of having no investing capital, says Alsop, though he adds: “We told every entrepreneur we talked to [in 2009] that we didn’t have fresh capital. Most VCs like to hide that fact, but we were really up front about it and it didn’t hurt us. We had tremendous deal flow and we helped [entrepreneurs] find investors because we fundamentally believe in helping them and that the smallest piece of value we add is money.”
Alsop Louie held its first close (on $20 million) for its second fund in December 2009. The firm isn’t disclosing its LPs.
The firm made 15 investments out of its first fund and has enjoyed three exits so far, though only one that has returned money to investors. In August 2008, British Telecom acquired portfolio company Ribbit, a telephone software maker, for $105 million in cash. The startup had previously raised $13 million in two rounds from Allegis Capital, Alsop Louie Partners, KPG Ventures and Peninsula Ventures, according to Ribbit co-founder Crick Waters.
Alsop Louie also backed Cake Financial, whose assets sold in what has been characterized as a “fire sale” to eTrade earlier this year. “The financial crisis made it hard to move forward with the company,” Louie has said. Cake raised $1.26 million in a Series A from Alsop Louie, Bay Partners and KPG Ventures that valued the company at close to $7 million, according to Thomson Reuters (publisher of VCJ).
Most recently, in June, portfolio company Sportgenic, an online media and tech startup, was acquired by the distributed media network Glam Media. Sportgenic had raised $10 million from Alsop Louie, Adams Street Partners, KPG Ventures and Greycroft Partners. It sold for an undisclosed amount in an all-stock transaction.
In 2009, when people were still really shell-shocked, we had many long meetings [with LPs], told people what we were doing and what the returns on our fund were, and we’d never hear from them again.”
“There are two ways to raise a fund right now: One is to have incredible returns, like the Foundry Group, [whose first fund IRR is] in the 60s,” Alsop says. “Ours is good—we’ve made money for our investors—but not that good. So the other way you do it is to establish some level of credibility about how things will go in the future.”
Part of what convinced LPs to invest is that Alsop Louie has peered into the future and built an investment thesis around its vision. “We’re looking at where the world will be three to four years from now,” Alsop says. “You want to be investing into the next tech cycle, not late into the last one.”
So what’s the next big thing? Alsop Louie says it is the “Evernet.”
“In the next generation, we’re going to solve the issue of real-time networks,” Alsop says. “Always on, pervasive, ubiquitous—all that stuff gets tossed around a lot, but it’s really going to happen. The question is how long will it take and how does it happen? And we have a proposition about how that will happen.”
Alsop points to FrameHawk as an example of the firm’s new investment strategy. “FrameHawk is developing a Web-presence server,” he says. “It’s early on in the sense that it’s only in pilots, but it’s working on associating resources and a network with a user, so that as the user moves around, it will deliver those resources—to their Android phone or their iPad or their TV or to a computer in a hotel room.”
Consider a person might be in his or her office on a conference call, looking at shared documents. “Well, if you stand up, the system detects that you’re starting to move and shifts the presentation to your cell phone,” Alsop says. “As you get into your car, it puts the call on your speakerphone. When you arrive home, it swaps the call to your home phone and puts the documents on your home computer.” —Constance Loizos