Employee Venture Funds, Keeping Up with the Neighbors –

NEW YORK – Often used as a retention tool, employee-only venture funds are becoming an expected job perk for accredited investors at investment banks, as well as select law firms.

Most recently, as numerous sources have reported, investment bank Donaldson Lufkin & Jenrette, is raising its first employee-only venture fund, joining the ranks of other firms who offer similar upsides for their employees. The firm expected to close the $150 million-targeted DLJ New Economy Fund in August. DLJ Managing Director Patrick Fallon preferred not to comment on the new fund.

DLJ follows firms like Goldman, Sachs & Co., Morgan Stanley Dean Witter and Prudential Securities Inc., which have instituted employee contribution venture funds.

Prudential, for example, has raised two employee venture funds over the past four years, totaling $50 million, said Mike Mortell, a managing director at the firm. Prudential plans to raise a third, larger fund in the fall, he said, adding that the opportunity has been a positive one, and a “good effort to keep people.”

Similarly, Dallas-based law firm, Akin Gump Strauss Hauer & Feld LLP, closed an employee venture fund in the spring (VCJ, June, page 32.) The firm established the vehicle to take advantage of deal flow that passes through the office from its clients, namely venture firms and entrepreneurs. The Akin Gump fund was open to 257 partners at the firm who were invited to make personal investments. The firm also added an undisclosed contribution to the fund on behalf of its associates and attorneys.

The funds are open to accredited investors, or those persons with a net worth, or joint net worth with their spouse, of at least $1 million, or a yearly salary of at least $200,000 for each of the two most recent years, according to Securities and Exchange Commission regulations.