SAN FRANCISCO – Rosewood Capital held a first close on half of its $400 million-targeted fund, Rosewood Venture Group, which will back Internet enterprises, a shift from its previous focus on consumer products and services companies, said Chip Adams, a founder and principal at the firm. A final close is expected in the next two months.
Rosewood plans to invest the vehicle in about 35 primarily early-stage Internet companies based in the U.S., focusing on the e-media, e-commerce, e-services and infrastructure sectors. The firm will make individual investments of between $1 million to $10 million, and singles out companies that fill a certain niche. “It’s not in the brands – it’s in the services that build these companies,” Adams said.
Moving with the market, Rosewood began shifting to an Internet focus in early 1999, and since then, the firm has completed 10 investments in that space, including BuyMedia Inc., Xpede Inc., UltimateBid.com Inc. and PeoplePC Inc.
Rosewood in January, bolstered its Internet savvy by hiring Principals Robert Keller, previously managing director and head of Hambrecht & Quist’s Internet investment banking practice, and Anne Martin, the former managing director and head of Internet investments at Deutsche Bank Alex. Brown. Keller, who has led deals with Amazon.com Inc., LookSmart Ltd., Vignette Corp., @Home, GeoCities and CNET Inc., will concentrate on Rosewood’s expansion to the media and services sectors. Martin, who will focus on the firm’s investments in the Internet infrastructure and communications spaces, has worked with companies such as America Online Inc., Exodus Communications Inc., Covad Communications Co., eBay Inc. and CBS MarketWatch.
The firm also enlarged its board of directors to complement its Internet focus. New members include eBay President and Chief Executive Officer Meg Whitman, Mayo Shattuck, co-chairman of Deutsche Bank Alex. Brown, Schuyler Marshall, president of Rosewood Corp., and Bob Fisher, former president of Gap Inc.
Rosewood believes that having a wide network of strategic alliances is key to its success. The firm uses what it refers to as the “Tuesday night test” to characterize a network member’s dedication, and it works like this: If a member of the network gets a call on a Tuesday night at 10 p.m. with a request, and it gets done by the next day, they pass the test, Adams said. “One of the things we pride ourselves on is that our network really delivers value.”
The firm’s previous $115 million Rosewood Capital III, which closed in 1997, is about 50% invested in some 12 to 15 Internet and consumer products and services companies.
Rosewood’s limited partners include a mix of wealthy families, foundations and university endowments, almost all of which are returning for the fourth fund, joined by some newcomers.
Founded in 1986, the firm is run by Principals Kyle Anderson, Mike Brown, Tim Burke, Kevin Reilly, Adams, Keller and Martin. Rosewood plans to hire additional partners, however, the timing and number is still undetermined, Adams said.
The firm, which plans to close about 10 to 15 deals each year, has an unwritten rule that each partner should not sit on the boards of more than five portfolio companies. “If you like something, like it big,” Martin said, illustrating the firm’s commitment to offering its portfolio companies capital, dedication, contacts and access to the network.