WALTHAM, Mass. – Responding to increased limited partner appetite for venture capital offerings, Advanced Technology Ventures recently closed its latest fund at $400 million.
Advanced Technology Ventures VI more than doubles the $175 million Advanced Technology Ventures V, which closed in October 1998.
“We had to carve back existing LPs; we have the philosophy that 80% to 85% of a new fund should come from existing LPs,” said Michael Frank, a general partner at the firm. “We take the balance from new LPs to keep the thinking fresh.”
Frank added that a greater capital base will lead to a bigger staff, as the firm is in the process of expanding its number of general partners to eight from the current five.
The new fund will follow a similar investment path, committing the majority of capital – approximately 80% – to information technology deals, with the remaining capital focused on health-care companies.
“We will put more time into investing in the communications area,” Frank said. “I think the fact that the fund is larger is [recognition] that the sizes of deals are going up in real time.”
To be sure, the firm does intend to continue investing in health care, particularly in medical devices and e-health, a sector that continues to be manageable despite increased liquidity alternatives.
“The cadence of health care is more regulated, and there is a more managed tone to investing,” Frank said. “The demand for capital is not as intense.”
He did add that while health-care companies take smaller capital bites per round, the length of the holding period requires investors to commit to more financings.
In addition, ATV will continue to invest in incubators, and Frank said the firm would likely commit capital to new incubators on the East and West coasts in the near term. ATV is a founding investor in Palo Alto, Calif.-based Garage.com.
ATV VI will likely invest in 30 to 35 companies, with the average investment ranging from $10 million to $15 million.