AUSTIN, Texas – Crediting an abundance of deal flow in the Southwestern United States, Austin Ventures has almost fully invested its $320 million sixth fund and is on the fund-raising trail with another vehicle targeting twice that size.
Austin Ventures VII is targeting a $750 million first and final close in late October, said General Partner Joe Aragona, adding that the firm already had commitments “well in excess” of that figure from limited partners in its previous fund.
Austin’s general partners wanted to raise a fund that would allow them to concentrate on making deals for the next several years, rather than having to constantly worry about fund raising, Aragona explained. Fund VI, which tapped deal flow in the Southwest, by press time had backed 26 companies in just 10 months, with another final four or five new investments expected to close by the end of October.
“We believe [the Southwest] has all the elements of all the great technology centers,” Aragona said, noting that there were plenty of research centers at schools such as the University of Texas and companies such as IBM Corp. and Cisco System Systems Inc.
In the first half of the year, 89 Texas start-ups raked in $444.88 million on the heels of a record-setting 1998, when 176 companies took in $841.61 million, according to Venture Economics Information Services, a data company affiliated with Venture Capital Journal,
Austin will focus on five core areas, including applications and infrastructure, business-to-business e-commerce, consumer e-commerce, semiconductors and communications, and the firm expects to back about 60 portfolio companies.
Austin additionally plans to invest $50 million in the formation of AV Labs, an e-commerce, application and infrastructure incubator to be headed by former TL Ventures Venture Partner Rob Adams, who also is a former executive at the Austin Venture IV portfolio company, Pervasive Software.
Austin currently is staffed by 19 investment professionals, but the firm will add six or seven people at all levels, Aragona said. “We staffed up for Fund VI when we started Fund V,” he said “We saw the opportunities and we believed this was going to happen.”
Prior limited partners include Brinson Partners, the California State Teachers’ Retirement System, Abbott Capital Management, the Ameritech Corp. pension, Bell Atlantic Corp., the California Institute of Technology, Crossroads Group, Dartmouth College, General Motors, HarbourVest, Harvard University, Lucent Technologies Inc. and the University of Texas.
Phone calls to several limited partners were not returned by press time.