WELLESLEY, Mass. – Battery Ventures plans an April launch for its $1 billion-targeted Battery VI LP, which will back Internet and communications infrastructure and services companies, said General Partner Rick Frisbie.
Battery already has in excess of $1 billion in commitments from existing limited partners but will cap the fund at $1 billion. The firm, however, will reserve $100 million of the fund for new limited partners, made up of 20 to 30 individual entrepreneurs and five strategic corporate investors, Frisbie said.
“We feel if you can get deal flow from these entrepreneurs and cement better relationships with corporations in the industries we do business in, it makes sense for us to add these new limiteds,” he said. Battery hopes to close the fund by May 31.
Battery invests solely in start-up to early-stage business-to-business e-commerce enterprises, as well as telecommunications infrastructure services companies because it prefers to be a company’s first institutional investor. “This is valuation related,” Frisbie explained. “We won’t pay a promoted price – if you find and control your own deals, you get good prices.” The firm takes a proactive approach to deal flow with its 27-member investment staff, who actively identify market segments and go after promising deals, he noted.
Battery VI will back between 50 to 60 companies, with individual deals falling at around $10 million. The firm will invest a total of about $16 million to $20 million over the life of a company, Frisbie said. About 33% of the fund will back business-to-business e-commerce, 20% telecommunications infrastructure and services companies and the remainder Internet infrastructure and services areas. The fund’s management fee and carried interest structure should fall under the industry standard.
The $400 million Battery V closed four international Internet and telecommunications deals, three in Europe and one in Israel, and Frisbie expects Battery VI to do two to three times as many international deals because of increased technology activity in Europe.
Frisbie declined to identify any of Battery’s new limited partners. However, LPs in previous Battery funds have included Harvard University, the Massachusetts Institute of Technology, HarbourVest Partners LLC and General Motors Corp. Battery V, which invested in 35 companies with a typical deal size of about $13 million, had a rate of return of more than 200% at the end of 1999. Frisbie said Battery probably will add an additional six to eight investment professionals over the coming months to help manage the new fund.