NEWTON, Mass. – The old venture capital adage about too much money chasing too few deals is about to be put to yet another test.
In a year that has already seen a plethora of $1 billion venture capital mega-funds, the most recent challenge has been issued by omnipresent Internet investor Softbank Venture Capital, which last week announced that it had recently closed Softbank Technology Ventures VI, its largest fund to date. The $1.5 billion behemoth was raised in just over one month with capital coming in from a select group of existing institutional investors, parent company Softbank Corp. and a trio of new groups including Redwood City, Calif.-based Champion Ventures.
The new vehicle arrives in the midst of public market turmoil that has caused a number of venture firms to slow down due diligence processes and carefully reconsider certain follow-on investments with existing portfolio companies. Softbank, however, isn’t fazed by the plummeting Nasdaq and still plans to unload all $1.5 billion within an 18-month time frame.
“What’s happened for us is that deals haven’t gone down in number, just in price,” said Gary Rieschel, managing director with Softbank. “We’re following the same investment process and believe that it’s finally become clear that you won’t get hurt if you’re truly committed to building companies… especially in the wireless and broadband spaces.”
The new fund does signal a bit of a structural change for Softbank, however, as it will invest in companies at all stages, rather than simply specializing in early- or late-stage plays.
“We felt that investment decisions should be based on domain knowledge, not on particular stages, because we want the people who know an industry best making the investments in that industry,” Rieschel said.
He added that the new venture vehicle recently made its initial investment in a Chicago-based online tax lien marketplace named AX.com. The asset exchange received a $12 million lead investment from Softbank as part of a slightly larger round. Additional deal information was unavailable at press time.
A team of existing principal managing directors, including Rieschel, will run Softbank Technology Ventures VI. The firm also announced last week that it had brought three new principal managing partners on board. They are: Carl Rosendahl, previously chief executive and chairman of Pacific Data Images; Greg Galanos, founder, former president and chief technology officer of Metrowerks; and Bill Burnham, former Wall Street analyst and general partner with Softbank Capital Partners who moved within the firm to this fund.
“I think it’s a very interesting time to be in the venture business,” Galanos said. “The Internet is really maturing and market no longer seems to be validating models based on land-grab.” .