Fund Briefs, December 2010

Computer Sciences Aims to Work with VCs

Computer Sciences Corp. (CSC) will likely not invest through a corporate-sponsored venture fund, but the IT services giant is studying the idea. It is eager to strike up relationships with VC-backed startups, including joint marketing deals that have the possibility of revenue sharing.

Computer Sciences, which reported $16 billion in fiscal 2010 revenue, is charting a new course. More than six months ago, it created the role of global vice president of emerging technologies and gave the position the mandate of finding next-generation technologies.

To get the job done, the current office holder, Brian Boruff, a former Microsoft executive, is scouring Silicon Valley’s venture-backed landscape for compelling technology.

“I don’t know whether you’ll see us be the next Kleiner Perkins, but I think you’ll see us talking to Kleiner Perkins,” Boruff says.

Boruff adds that a marketing deal with Computer Sciences could help a young company accelerate growth by tapping into the CSC customer base.

And while acquisitions are not necessarily the goal, they are possible, too. Computer Sciences recently acquired privately held security startup Vulnerability Research Labs, and Boruff says the company’s aim is to get 2% to 3% of revenue growth from acquisitions. —Mark BosletEntrepreneurial Program Begins Down Under

A group of Australian angels and a startup executive hope to jump-start entrepreneurialism in the land down under, as they have kicked off StartMate, a Sydney-based mentorship program.

The three-month program began accepting applications in October. The organizations is not disclosing figures, but the “response has been great from the applications received so far [and the] conversations started,” says Niki Scevak, founder of the online search service Homethinking and a member of the StartMate mentorship team.

The program’s aim is to inspire more Aussies to start companies, as well as to capitalize on a growing class of Australian entrepreneurs now turning into angel investors.

StartMate says it is looking for seed ideas in Web or mobile environments with transactional models at their heart. Social games and mobile apps are OK. So are direct-response advertising plans.

Applicants need to be technical in nature, interested in building lean businesses and located near Sydney (sorry, Perth). Five winning startups will be selected for three months of mentorship. They will each receive a $25,000 investment and a trip to Silicon Valley. —Mark Boslet

Australian Government Steps Into Venture Capital

The Australian government has ponied up $80 million for four venture funds that invest in startups down under.

The Australian government’s move represents the fourth round of investment under a 1997 fund, Innovation Investment Fund, which is aimed at helping early stage entrepreneurs commercialize their research. Twelve funds have been singled out over the years.

The $80 million in the present round is to be matched by private funds and will go to three life sciences and bioscience funds—Carnegie Venture Capital, MRCF IIF Partnership and Start-up Australia—and Southern Cross Venture Partners, an Internet, software and cleantech investor.

Since 1998, the Innovation Investment Fund has financed more than 90 companies, including the Internet startup Looksmart, pain management company QRxPharma, drug discoverer Pharmaxis and the biotech company Alchemia.—Mark Boslet

Provident Launches with $25M to Invest in Health Care

In early November, four principals with ties to the Boston-based investment bank Provident Healthcare Partners launched a $25 million fund to make early stage venture and middle market private equity deals in the health care sector. Provident Healthcare Ventures, which will include an incubator program for some seed deals, will invest from $250,000 to $3 million in companies in the health care IT, hospice and specialty pharmaceutical sectors.

The four principals who are managing the Boston-based firm invested the $25 million without any outside fund-raising. The principals include Bob Ciardi, who was managing partner of Provident Healthcare Partners, and William Shepard, who’s listed as a managing director of Provident Healthcare Ventures. —Alastair Goldfisher

NVCA Expects VC Performance to Improve in 2011

Venture returns fell in the second quarter pretty much across the board, according to the latest batch of numbers from the National Venture Capital Association (NVCA) and Cambridge Associates. Only the 20-year return notched a very modest gain.

The deterioration could continue through “several more quarters of declining performance overall until distributions to limited partners begin to flow more readily in the coming year,” NVCA President Mark Heesen said in a prepared statement. “Based on the current exit market, the 10-year return number—which we view as the most reflective of industry performance—won’t begin to reverse its negative trend until mid-2011.”An NVCA press release stated: “While the deterioration was mild, it reflected ongoing challenges in today’s venture-backed exit market which continued to struggle to recover from the financial crisis of 2008. Still venture capital performance surpassed the public market indices for the quarter, 3-, 5-, 15- and 20-year time horizons.”

Cambridge’s U.S. Venture Capital Index tracks return data from 1,294 venture funds formed from 1981 through 2009. The index shows that VC funds produced a one-year return of 6.4% as of June 30, up from a one-year return of -17.1% on June 30, 2009; a three-year return of -2.7% (down from 1.3% a year earlier); a five-year return of 4.3% (down from 5.7%); a 10-year return of -4.2% (down from 14.3%); a 15-year return of 38.1% (up from 36.3%) and a 20-year return of 24.3% (up from 22.7%). —Mark Boslet