MENLO PARK, Calif. – Doll Capital Management Inc. began pre-marketing its second fund in mid-November and planned to formally launch fund raising in February.
Doll Technology Investment Fund II, which has a goal of between $80 million and $100 million, will back early-stage telecommunications and Internet software and services companies, said Managing General Partner Dixon Doll. About two-thirds of the businesses backed by the fund will be telecommunications and Internet companies, he said.
With only a few exceptions, most limited partners from the first Doll fund have indicated interest in backing the second effort, he added.
Previous backers include MASCO Capital Corp., the investing arm of a Taylor, Mich. plumbing supply company; St. Paul Fire & Marine Insurance Co.; 3Com Corp.; JAFCO American Ventures; China Aerospace, through its Taiwan Casil Holdings Ltd.; Athena Venture Fund L.L.P., associated with the LG Group of Korea; Vertex Venture Holdings, formerly known as Singapore Technologies; Itochu Technology Inc.; and Nippon Investment & Finance Co. Ltd. Limited partners could not be reached for comment at press time.
Mr. Doll estimates a need for $30 million to $50 million from new investors assuming existing L.P.s provide the fund’s remaining capital.
Doll Technology Investment Fund I, an early-stage vehicle focused on data communications and telecommunications, closed on $46.3 million in September 1997. Doll I had backed 15 companies by press time, a figure Mr. Doll expected to reach 20 by late spring. The plan is to have the new vehicle prepared to make deals as the first fund completes its new investments. The managing general partner said he anticipates a first, and possibly a final close, in March or April.
At press time, Doll I had held an initial public offering of one portfolio company, International Manufacturing Services, in which the venture firm had a small stake. Mr. Doll said he anticipated two or three major liquidity events by mid-1999.
Doll II will invest about two-thirds of its capital on the West Coast and look to place the remainder in other areas of the United States and abroad. Initial investments will run about $1.75 million to $2 million each, and Doll expects to put $4 million to $5 million in each individual portfolio company over time. Although the target size of Fund II is twice that of the inaugural fund, Mr. Doll said the second fund will back only about 20 to 25 companies, a modest increase from the first vehicle. The additional capital, however, will allow Doll to take larger stakes in its portfolio companies, he explained.
Like its predecessor, Doll II will feature an 80%/20% carried interest split and a 2.5% management fee that tapers annually at the end of the sixth year. The rate of diminishment had not been set at press time, but Mr. Doll said it likely would be one-quarter percentage point per year.
Doll Capital Management is in the market for a third general partner to help manage Fund II with General Partner David Chao and Mr. Doll. The firm already had begun interviewing candidates by mid-December, and Mr. Doll said he expected to have a new G.P. in place by mid-year.
The firm also will initiate an entrepreneur-in-residence program, housing one or more people who would review deals for the firm and, perhaps, craft a business plan for a new endeavor. At press time, Mr. Doll had his eye on one potential entrepreneur he declined to name.