ALEXANDRIA, Va. – Marketing the first institutional fund in its 11-year history, Columbia Capital garnered more than $450 million in just over six months of fund raising.
The new fund, Columbia Capital Equity Partners II, will continue the firm’s strategy of investing in the communications and information technology sectors. Managing Director Jim Fleming said Columbia always has pursued opportunities at every investment stage, but he noted that the firm had been restricted in some later-stage deals by its capital constraints.
“This is a natural progression in what we’ve done,” Mr. Fleming said. “Looking at the industry over the last decade, everything has accelerated, so to pursue opportunities we had to raise this fund.”
In addition to traditional venture investing, Fleming said the firm has become increasingly active in building companies around a concept and a management team. These deals, while typically involving larger dollar figures than expansion-stage rounds, come at a lower cost to the firm than accepting the high valuations entrepreneurs want and receive.
“We are doing that more now because the market is so pricey,” Mr. Fleming said. “One-third of our deals stem from a concept that [we] have built a company around.”
Still, Columbia will continue to run the gamut in its investments, from early- to late-stage venture deals. In addition, Mr. Fleming said the firm would evaluate buyout opportunities that fit within its target industries. In general, investments will support either service providers or software and hardware companies that focus on the IT and telecom sectors.
“Service providers are lower risk, though larger dollars, while technologies are higher risk,” Mr. Fleming said. “We sold the institutions on the integration of the two areas.”
BT Alex. Brown was a placement agent for Columbia, a decision Mr. Fleming said was driven by the partners’ desire to concentrate on investing rather than taking the time out to raise the fund in-house. “We felt this could truncate the process,” Mr. Fleming said.
Launched last November, the fund held its first close in March and a final close in May. Since the first close, Columbia has participated in seven deals, three of which – Pangea Ltd., XM Sattelite and Advanced Radio Telecom – saw the firm partner with large strategic partners and venture firms in financings that totaled more than $100 million. The remaining deals were more traditional venture rounds in Taqua, Point.com, Altiga Networks and Broadsoft.
Limited partners in the fund include traditional institutional investors such as public and private pension funds, asset managers and university endowments. Mr. Fleming would not disclose the fee structure or carried interest split.
Columbia will continue to troll for deals in the Washington D.C. region, which has produced at least 25% of its deal activity, but the firm plans to look throughout the U.S. for investments.