LOS ANGELES – Smart Technology Ventures is preparing a final close on its third vehicle, Smart Technology Ventures III, expected to reach $175 million upon securing two-to-one leverage on a portion of the fund from the Small Business Administration, said David Nazarian, a managing member at the firm.
The fund, which launched at the start of the year, held a first close in March on approximately $72 million from limited partners, Nazarian said. Smart Technology decided to hold $25 million of the original capital outside of the Small Business Investment Company to invest in companies that fall outside of the SBA’s restrictions regarding company size and net worth, he said.
At press time, the firm had invested about $14 million in six companies. Expected to total about 35, investments will be in early-stage wireless, fiber optics and Internet infrastructure companies, and will range from $2 million to $7 million, over several rounds, Nazarian said.
Prior to raising Fund III, the firm backed 34 companies in the telecommunications, Internet and information technology spaces with investments averaging between $500,000 and $700,000. The first two vehicles, totaling about $20 million, were funded entirely by the Nazarian Family on an as needed basis.
The firm decided to create a venture fund to add value to its capital and is sticking to companies based in Southern California because it believes that the next couple of years are a window to growth in the region. The Southern portion of the state is less competitive, and therefore deals are less pricey than in the North, he said.
Smart Technology’s portfolio includes companies such as Sequoia Software Corp. and Centillium Communications Inc., both of which went public in May, and VerticalNet Inc., which went public in February 1999. Additionally, Broadcom Corp. announced in mid-June that it would buy Innovent Systems Inc., another company in the Smart Technology portfolio.
The firm retains a management fee of 2% and an 80%/20% carried interest split. The limited partners in the fund consist of a mix of institutions and high-net-worth individuals and families, including the Nazarian Family. All of the fund’s investors are based in the U.S., Nazarian said.
The firm’s four managing members are Nazarian, Joel Balbien, Joseph Marks and Mehran Matloubian, who also serves as the firm’s chief technology officer.