PALO ALTO, Calif. – Charter Growth Capital expected a final close in February for Charter Growth Capital LP II, falling somewhere between $300 million to $350 million, said Kevin McQuillan, a general partner at the firm.
Launched in October 1999 with a $200 million target, the vehicle held an initial close two months later on $160 million. The fund surpassed its target because the first fund generated an internal rate of return of more than 300% net, which enhanced limited partner interest, McQuillan said.
The fund will invest in about 40 to 45 communications, enterprise software and business-to-business e-commerce companies. Charter Growth generally invests between $2 million to $10 million in California-based expansion-stage companies that have a proven product and existing customers, McQuillan said.
The firm’s previous $106 million Charter Growth Capital LP, which closed in October 1997, had backed 32 companies and has one remaining investment. Of those portfolio companies, 10 have gone public and an additional five are expected to enter the public market within the next three months, McQuillan said. They include Commerce One Inc., Copper Mountain Networks Inc., Alteon WebSystems Inc., Broadbase Software Inc., Active Software Inc., Agile Software Corp. and Interwoven Inc.
The firm’s limited partners consist of a mix of fund-of-funds, wealthy families and pension funds, including General Motors Corp. All investors in the first fund have returned for the sophomore vehicle and will be joined by several newcomers, who prefer to remain unnamed. The firm retains a management fee and carried interest structure that McQuillan described as standard.
The firm’s investment team consists of General Partners McQuillan, Steven Bird and Jim Boettcher, who are all active in sourcing deals, and they expect to add a new partner and one or two more analysts in the next couple of months to assist with the new fund.