REDWOOD CITY, Calif. – Draper Fisher Jurvetson in December expanded its network of regional venture firms as it invested $5 million in Cambridge Incubator. In addition to the investment, the venture firm will raise and co-manage the Cambridge Incubator Fund, which has a $100 million target.
The fund was expected to hold a first close by year end, said Timothy Rowe, chief executive of Cambridge Incubator. Draper Fisher’s investment is in the incubator and will not be allocated for the fund. The Boston Consulting Group, Rowe’s former employer, also contributed $5 million to the incubator. Rowe said he expects venture firms, institutional and high-net-worth individual investors to invest in the vehicle.
“There is always a gap between when people say they will commit and when they write the check,” Rowe said. “We have had discussions with a major fund-of-funds that is a primary investor in some of the largest incubators in the country.”
The fund’s structure, a 75%/25% carried interest split and 2.5% management fee, is in line with other Draper-managed funds. Rowe and John Fisher, general partner at Draper Fisher, will manage the fund along with two additional general partners.
“We are in late-stage discussions with three partners at leading venture firms,” Rowe said. “Ultimately, we will take two of them.”
Rowe co-founded Cambridge Incubator in June with Andrew Olmsted, an incubator analyst at Arthur D. Little. Unlike venture funds established by other incubators such as idealab! and Orbit Capital Group, Rowe said the incubator will provide all of the fund’s deal flow.
“In the investment community, there is a higher success rate with incubator deals because there is more scrutiny and support,” he said. (Although several academic studies suggest that companies graduating from business incubators have a greater chance of success, no report has quantified an incubator’s influence on a company’s exit strategy.)
Cambridge Incubator develops information technology companies with a focus on business-to-business e-commerce. In 1995, Rowe helped his father conceive RoweCom, a business-to-business supplier of books and periodicals with a market capitalization of $500 million.
Cambridge Incubator joins privately held idealab! and divine interVentures as incubators that plan to access the public markets for financial support.