Bertram—which invests in technology, health care, infrastructure and financial services—aims to bring a venture capitalist’s flair to its investments. Drazan’s strategy is to buy companies not quite ready for middle-market buyout firms and, using his venture capital skill set, teach them how to grow faster, become profitable and market themselves to the buyout community. The firm, based in Palo Alto, Calif., focuses on companies with earnings of $5 million before interest, taxes and amortization.
Bertram’s a strategy is resonating with limited partners. Drazan sent out the first PPM for the fund in June 2006, and closed on $250 million less than two months later. The firm also closed its most recent $100 million fund-raising push in under two months.
Bertram’s initial fund-raising effort attracted 15 limited partners, including Boeing, Grove Street Advisors, Lehman Brothers and Partners Group. With its latest push, Bertram added Lexington Partners. When Drazan closed the debut fund last year, about 75% of the investors were also backers of Sierra Ventures.
Game company on tap
The added fund-raising comes as Bertram closed three deals this year. In January, Bertram Capital purchased AuthorHouse Book Publishing Co., the largest self-publishing company worldwide. In April, Bertram participated in a $60 million buyout of electric power equipment maker Power Distribution Inc. In May, the firm picked up billing services company Physicians Management Group for an undisclosed amount.
Drazan says the firm’s next deal is likely to be the takeover of a massively multiplayer online role-playing game, but he declined to say more.
Before founding Bertram, Drazan co-founded Sierra Ventures and helped it raise eight funds. He was compelled to launch Bertram for a number of reasons, he says, including that he thought venture funds were getting larger, when they should focus on staying nimble and small. Drazan tested this idea while at Sierra Ventures when he convinced his colleagues to purchase a company called Micro Power Electronics, which Sierra Ventures sold to Weston Presidio last year for an undisclosed amount.
Similar to AuthorHouse, Micro Power—which makes batteries for portable devices—wasn’t growing, so the VC community ignored it, and yet it didn’t have the kind of earnings stability attractive to LBO shops, Drazan says.
Drazan, who is still listed as managing director at Sierra Ventures, continues to work with the portfolio companies he funded. —Alexander Haislip and Mark Cecil