WELLESLEY, Mass./SAN MATEO, Calif. – Battery Ventures was slated to reach a first and final close on its fifth fund at the end of March.
The bi-coastal firm began talking with existing limited partners last fall about Battery Ventures V L.P., which was targeted at $400 million, double the size of the firm’s last vehicle. An offering memorandum was distributed in January and expressions of interest quickly exceeded the fund’s goal.
Battery has been whittling down commitments to keep to its $400 million mark, said General Partner Rick Frisbie. All but $50 million came from existing limited partners, and most of the new L.P.s are institutions that have hired an investment professional with previous experience with Battery.
The new vehicle will follow in the footsteps of its predecessors, backing software and communications companies, including telecommunications services and equipment. Battery invests in start-up to late-stage companies in the United States, but when backing later-stage companies, the firm favors those that have been bootstrapped. Battery prefers to be the first investor in a company, and individual deals average $10 million. The venture group will make investments of as little as $2 million and as much as $25 million over time, Mr. Frisbie said.
Battery is willing to act as a solo investor in a company or to syndicate deals. The firm was the only investor in about one-third of the deals made by Battery Ventures IV, and the bulk of the new fund will allow Battery to invest independently more often, Mr. Frisbie explained.
Fund IV, a $200 million vehicle wrapped in January 1997, has almost finished making new investments. Three-fourths of the capital had been called down by press time, and a notice for an additional 5% has just been issued, Mr. Frisbie said.
Fund V features a 2.5% management fee and an 80%/20% carried interest split. The general partners are putting in 3.25% of the fund.
Battery is in the market for two investment professionals, likely at the senior associate or principal level. One person will focus on software, the other on communications; both will work on the West Coast.
The University of Washington (UW) and the Washington State Investment Board are return investors in Battery V.
Doug Breckel, UW senior associate treasurer, said the university has committed $6 million to the new vehicle, having been pleased with the performance of the previous fund in which UW wedged “a toehold investment” of $2.5 million.
Mr. Breckel was concerned about the leap in fund size between Battery IV and V but was comforted by the quality of Battery’s investment team and its aggressiveness in finding new deals.
Washington State Senior Investment Officer Ashu Rajbhandari acknowledged the jump in fund sizes as an industry-wide phenomenon. The state pension became acquainted with Battery through a fund-of-funds, and Mr. Rajbhandari, who joined Washington last year, has observed Battery over the years. He said he has been impressed not only with the firm’s performance, but also with its structure, strategy, follow-through and execution of deals.