MENLO PARK, Calif. – Doll Capital Management expects a mid-May first close on its third vehicle, the $400 million-targeted DCM III and recently hired Venture Partner Thomas Blaisdell, and Principal Eric Gonzales, to help invest the new fund, said Managing General Partner Dixon Doll.
Doll Capital plans to invest the vehicle in some 25 to 30 early-stage Internet and communications companies in the United States and abroad. Some 20-25% of the fund is reserved for international deals, mostly in Asia, up from a 15% allocation in the firm’s previous fund, Doll said.
Doll Capital invests in Asia with help from its strategic limited partner base of Asian investors, who contributed about one-third of the capital in the firm’s previous two funds. And although the high amount of capital floating around the region creates competition among investors, Doll Capital considers itself, as well as other Silicon Valley firms, more experienced and sophisticated than most of their Asian counterparts because the markets there are still maturing, Doll said.
The ratio of capital to the number of companies in which Doll Capital will invest, is higher than in Fund I and Fund II, enabling the firm to take larger percentage ownership positions in each portfolio company, Doll said. The firm has gradually increased its ownership stakes from single digits in Fund I, to middle teens in Fund II to an expected low- to mid-twenties in Fund III, he said.
At press time, the firm’s previous fund, the $155.5 million Doll Technology Investment Fund II, which closed in September 1999, was about 90% invested. The vehicle backed about 20 companies with average investments of around $7 million. Fund II is invested alongside an affiliate and two parallel funds totaling $150 million (VCJ, November 1999, page 22). The $8 million affiliate fund was reserved for friends of the firm, and the two parallel funds, which together total $14 million, were established for a Japanese networking-equipment manufacturer and the other for strategic corporate investors.
Doll Technology Fund I closed on $46.3 million in September 1997 and is completely invested in 18 companies (VCJ, January 1997, page 18), of which four have gone public, two are in registration and two have been acquired.
Domestic limited partners in previous funds include Fleet Capital Corp., 3Com Corp., Norwest Venture Capital, St. Paul Venture Capital, Medical Academic and Scientific Community Organization Inc., INVESCO Funds Group Inc. and Mesirow Financial. Foreign investors include JAFCO Co. Ltd., Recruit, Fujitsu Ltd., Nippon Investment & Finance Co. Ltd., LG Group of Korea, the Government of Singapore and Itochu Technology Inc.
Doll Capital expects most of its existing investors to return for Fund III, increasing their commitments to maintain the same percentage of involvement as in previous funds, Doll said, adding that the net to limited partners internal rate of return as of December 31, 1999, was 242%.
Doll Capital was “inspired by the market” to increase its carried interest structure to 75%/25%, up from 80%/20% in previous funds, but the firm’s 2.5% management fee will remain the same, Doll said. The firm increased its carry because other competing firms did the same, Doll said, naming Crosspoint Venture Partners, Com Ventures, Sequoia Capital and Redpoint Ventures. “These [75%/25%] are the terms they are charging.”
General Partners David Chao, Peter Moran and Doll, invest the firm’s funds, along with newcomers Blaisdell and Gonzales. Prior to joining Doll Capital, Blaisdell worked at Encanto Networks as a vice president of marketing, and Gonzales led product marketing and managed global support offerings and product distribution at Cisco Systems Inc. The firm plans to hire another one or two general partners by July, Doll said.