NEW YORK – The founders of Atlantic Venture Partners in February joined forces with Draper Fisher Jurvetson to launch the $100 million-targeted Draper Fisher Jurvetson Gotham.
The vehicle previously was launched by Atlantic Venture’s Managing Partners Daniel Schultz and Ross Goldstein (VCJ, November 1999, page 26), both of whom had launched their fund in May 1999 to invest in early-to late-stage information technology companies on the East Coast. Targeted at $50 to $75 million, the fund held a first $20 million close in September 1999.
In January, however, Schultz and Goldstein met Tim Draper, the Founder and Managing Director of Draper Fisher Jurvetson and decided to join the firm’s network of affiliate funds by rolling their Atlantic fund into the new Gotham fund.
“This was a way for us to be part of a nationwide group, which adds value to our partnership,” Schultz said. Draper Fisher Jurvetson now has six affiliate funds throughout the United States in Los Angeles, Salt Lake City, Vancouver, Wash., Pittsburgh, Reston, Va. and New York. Each fund shares in the carried interest split of the other affiliate funds, he said.
Each of the affiliate funds operate as independent entities, but work closely with Draper Fisher Jurvetson to identify potential opportunities. “Now I have a partner in LA, who can handle opportunities there much more efficiently than we could,” Goldstein said. “At the same time, if one of the other affiliates knows about a deal in New York that we have not heard about, they will let us know about it and we can pursue it.” Located in Redwood City, Calif., Draper Fisher Jurvetson invests in early-stage information technology companies all over the U.S.
The Gotham fund already has $70 million in commitments from existing limited partners in the Atlantic Fund and from Draper Fisher Jurvetson funds. Schultz said he expects Draper Fisher Jurvetson to help find more limited partners for the fund. The vehicle is expected to hold a second close before the end of February, with a final close in the last week of March, Goldstein said. Its general partners consist of Schultz, Goldstein and Draper, as a representative of the network of affiliate funds. Schultz and Goldstein will manage the Gotham fund, he said, adding that the partners will invest significantly in the vehicle but declining to say how much. The vehicle has a 2% management fee and an 80%/20% carried interest split.
Draper Fisher Jurvetson Gotham plans to invest in about 20-25 early-stage IT companies in and around the New York area, Schultz noted. The fund recently made its first investment in Mimeo.com, an Internet document reproduction, binding and delivery company. Schultz would not disclose the size of the investment. He said Draper Fisher Jurvetson Gotham was the largest single investor in the company’s first round of financing and, along with an investment from Draper Fisher Jurvetson VI, the company received a total of $9.6 million from the Draper family of funds.
The Gotham Fund’s strategy also includes investing in foreign companies, in particular those of Israeli origin, as they enter the U.S. market. “More and more non-U.S. companies are coming here right away, because you need to get here quickly because of the way Internet time works,” Schultz said, adding he is familiar with Israeli companies, because of his work at Lehman Brothers, one of the top underwriters of Israeli technology companies.
Atlantic Venture’s limited partners were made up of Comverse Technology Inc. and a handful of high-net-worth individuals, some of whom are either current or former executives at Intel Corp., Sun Microsystems Inc., Dell Computer Corp., 24/7 Media Inc., Sapient Corp. and Cheyenne Software Inc. Because of the fund’s expanded size, it will now also target endowments and fund-of-funds as potential limited partners, Schultz said.
Schultz was formerly the head of the equity private placement group at Lehman Brothers. Goldstein focused on technology, telecommunications and media companies in Morgan Stanley’s investment banking division, and he was previously chief financial officer at Interactive Imaginations Inc., the predecessor to 24/7 Media.