NEW YORK – Euclid Partners and S.R. One Ltd., the venture capital affiliate of SmithKline Beecham PLC expect a final close in the second or third quarter on their first fund, the $200 million-targeted EuclidSR Partners, said Milton Pappas, one of the fund’s nine general partners.
After more than a decade of co-investing on various deals, information technology-focused Euclid and the health-care and biotechnology-focused S.R. One started discussions nearly a year ago about combining their expertise. Subsequently, EuclidSR Partners was launched in February, said General Partner Brenda Gavin. Euclid rolled its Euclid Partners V LP into the new vehicle, said Pappas, declining to reveal Euclid’s fund size at the time.
The new fund will invest in 15 to 20 late-stage bio-pharmaceutical companies, early-stage bio-technology companies and developmental to early-stage Internet and information technology companies, Gavin said. Two Internet investments made by Euclid also will be folded into the new fund’s portfolio, and a third deal is already in the pipeline, Pappas said.
The fund has already raised about $125 million, including commitments from Euclid’s existing limited partners, Gavin said. EuclidSR Partner’s single largest limited partner is SmithKline Beecham PLC; Gavin declined to say how much it invested. Other LPs include First Capital Group, MN Life Insurance, Westcoast Energy Inc., Avista Corp. and the Union Labor Life Insurance Co., and the fund will target insurance companies, pension funds and endowments, as well as high-net-worth individuals as other potential limiteds.
The vehicle will back individual companies with about $10 million to $15 million over several rounds of financing. EuclidSR has no geographic focus, although Gavin said she expects much of its deal flow to come from the East Coast and Mid-Atlantic because of their proximity to the firm’s offices in New York and West Conshohocken, Pa.
When the two firms launched into discussions about a year ago, Euclid began raising capital for Euclid V, with the intention it would be combined into the joint vehicle, Gavin said. Once SmithKline Beecham gave its approval, the two firms rolled Euclid V and its two investments into the new vehicle and began joint fund raising, Gavin said.
While EuclidSR Partners might be perceived as a first time fund, both backers are reputable venture firms, Gavin said. Another possible contention among new LPs is whether the fund is able to attain high returns since S.R. One had been making strategic investments for SmithKline, she said. “The only thing that is different is that the particular objective has changed,” she said. “We were supposed to invest strategically, that doesn’t mean we don’t know how to invest for return.”
The fund will be managed by its nine general partners, consisting of Euclid’s four partners, Graham Anderson, Bliss McCrum, Stephen Reidy and Pappas, along with S.R. One’s principals, John Braca, Barbara Dalton, Elaine Jones, Raymond Whitaker and Gavin. The general partners will collectively put up 1% of the fund’s value, Gavin said. The vehicle’s management fee will be 2.25% and it will feature an 80%/20% carried interest split.
The two firms will continue to manage their existing funds separately, Gavin said. However, in the future, the combined group is expected to raise new funds together. “They are our partners now,” Pappas said. “We’ve gotten married.”