REDWOOD CITY, Calif. – Draper Fisher Jurvetson closed two funds totaling $1.3 billion in mid-December. Draper Fisher Jurvetson Fund VII will follow the firm’s established investing patterns, and Draper Fisher Jurvetson ePlanet Ventures marks the firm’s first globally-focused fund.
In anticipation of ePlanet, the firm opened offices in Hong Kong, Tokyo and Singapore with a London office awaiting government approval. Other locations, including Israel, are on the drawing board. All the international partners have technology experience and experience internationally said Warren Packard, DFJ managing director.
DFJ started raising ePlanet in 1999, and the government of Singapore kick-started the fund with a $100 million investment in December 1999. Packard said the fund-raising process was long for ePlanet, because the firm sought a large base of strategically-mixed global limited partners for the first time.
As with previous DFJ funds, the $690 million ePlanet will invest in “information technology broadly-defined,” said Packard. EPlanet will invest in all growth stages globally but only make late-stage investments in the U.S.
Packard said the fund would invest in Asia, Europe and the U.S., and although allocation targets had not been set, he expected the fund to split its investments equally between the three regions. He said the limited partners were similarly split between the three regions.
DFJ, like any venture capital firm, wants to build its portfolio companies into world-class companies, but Packard said that moving their products and technologies across borders would not necessarily be a priority.
“I don’t think globalization is going to happen as much as helping a company expand within a region,” Packard said, adding that he wants growth wherever that can occur.
The firm began raising Fund VII shortly before its first close around $400 million in September. DFJ offered LPs from the $400 million Draper Fisher Jurvetson Fund VI equal investment in the new fund, and Packard said most of the LPs agreed to the commitment.
Since then, the firm has been seeking new investors to reach Fund VII’s final close at $640 million. Packard said the fund raising was more difficult than expected based on the timing.
Packard said several potential LPs could not invest in Fund VII because they had already committed their VC allocation for 2000. He said the mega-funds of last year may have depleted the VC coffers prematurely, but the firm still managed to attract another $200-plus million.
Fund VII will follow DFJ’s traditional style of domestic early-stage technology investing.
Packard expected the two funds to each invest in roughly 30 companies, and expected the total investments in a particular company to eventually reach about $15 million. The investment range for ePlanet may swing more widely than Fund VII’s range, because of ePlanet’s broader stage focus.
DFJ may initially invest $1 million to $2 million in a company with the goal of reaching full investment through follow-on, but Packard said the firm did not believe in setting milestones.
“Milestones create perverse incentives,” said Packard. He said young companies need flexibility to grow, and he likes to give them shifting targets and give incentives on subjective achievements.
Packard said the firm’s most recent endeavor, Draper Fisher Jurvetson Fund VI, has been fully allocated with about two-thirds of its $400 million still available for follow-on investments. He said the general partners made significant investments in Fund VII, and the fund has typical management fees but a premium carried interest structure.
DFJ began investing both funds following their early commitments from LPs. EPlanet’s investments include scalable optical switch developer BrightLink Networks Inc., and Fund VII recently added e-scheduling firm Xtime Inc. to its portfolio.
In January, DFJ’s New York affiliate, Draper Fisher Jurvetson Gotham Venture Partners, closed its first fund at $107 million. This fund will focus on early-stage technology companies in the New York area.