MENLO PARK, Calif. – El Dorado Ventures held a $250 million final close on El Dorado Ventures VI at the end of November, said Shanda Bahles, a general partner at the firm. The vehicle was launched in the fourth quarter of 2000 with a $200 million target, she added. The firm is aiming for a January close on $25 million for Fund VI’s side vehicle, she noted. This fund, whose limited partners are entrepreneurs who help the firm with deal flow and due diligence, will invest alongside the main vehicle, she said.
Fund VI is nearly twice as big as El Dorado’s previous vehicle, 1999’s $130 million El Dorado Ventures V, because the firm wanted to be ready for the new New Economy and its return to a more classic venture capital investing model, Bahles said. “We wanted to have enough money on hand, so that we could have more dry powder around for our portfolio companies, so we can support them for a little while longer,” she said. However, the firm capped the fund at $250 million because it did not want to be pushed out of its traditional early-stage investing philosophy by a super-size fund that would require larger and later-stage deals, she noted.
The vehicle will focus on Internet software and services companies and communications businesses, Bahles said. On the Internet side, El Dorado is primarily interested in business-to-business, enterprise software, Web application deals, she noted. In the communications arena the firm is currently interested in everything from wireless to datacom, she said.
The new fund will invest in approximately 20 companies with an initial investment of $3 million to $4 million. Follow-on investing should ramp up the average deal size to about $10 million to $12 million over the life of a deal, she said. About 80% of these deals will be Series A financings, she said, adding the firm is also the first institutional investor in 80% of the deals it does.
The overwhelmingly majority of the deals funded by El Dorado will be for companies located on the West Coast, Bahles said. Because the firm believes in working actively with its portfolio companies and limits the number of board seats its partners can take, El Dorado’s partners just do not have the time to travel to a distant portfolio company, she noted.
Fund VI’s LPs are all institutions, Bahles said. The vehicle’s LPs include public and private pension funds, university endowments and fund managers like Abbott Capital Management LLC and Pathway Capital Management LLC, she added.
El Dorado put up 1% of the new vehicle’s total capital, she noted. The fund retains a standard 2.5% management fee and 80%/20% carried interest structure. Concurrent with its closing, the vehicle closed on its first investment for $5 million in Glow Networks Inc., a Richardson, Texas-based optical network systems integrator.