SAN FRANCISCO WaldenVC held a more than $200 million first close in mid-June on WaldenVC II, said Art Berliner, general partner. The $200 million-targeted vehicle was launched in January. Due to continued interest from potential limited partners, Berliner said the fund would remain open to investors throughout the summer. Berliner said he expected to hold a final close on the vehicle, which will be capped at $300 million, by the end of August or early September.
Like WaldenVC’s previous vehicle, the $62 million WaldenVC I, which closed in 1997, Fund II will back early-stage Internet, new media and e-commerce companies. Within those industries the fund will focus on advertising and direct marketing, e-learning and information services and entertainment and community sectors, said Alex Gove, vice president.
The fund will also make investments in area that is new to the firm: the enhanced TV space, Gove added. Enhanced TV is an industry phrase that refers to next-generation televisions and TV networks that have capabilities such as interactive programming, Web browsing and enhanced broadcasting. These investments will be overseen by Larry Marcus, who joined WaldenVC in mid-June as the firm’s fifth general partner. Previously, Marcus worked as director of equity research in the new media, broadband and Enhanced TV sectors at Deutsche Bank Alex. Brown.
Berliner said he was unsure of just how many deals the vehicle would back because of its as-of-yet-undetermined size. “In a perfect world, it would be a $250 million fund and we would back 25 companies with $10 million each,” he added. Berliner said WaldenVC would typically invest $5 million up front and then do follow-on investing to push the total capital invested in a company to approximately $10 million to $12 million.
WaldenVC prefers to invest in companies on the West Coast because it is easier to work actively with companies that are close by the firm’s offices, Berliner said. However, the firm does invest beyond the West Coast and works with two affiliate groups, Walden Israel and Walden International Investment Group, which have a more international focus. The firm is putting up more than 1% of Fund II’s total capital. The vehicle’s carried interest structure begins at an 80 % split, but WaldenVC’s portion of the carry can increase to 30%, depending on performance.
The fund’s limited partners are an equal mix of corporate strategic investors, institutional investors and individual investors, Berliner said. “The individuals are chief executive officers and prominent executives at companies who can add value to the fund, while our corporate investors may co-invest, bring us deals or even sit on some boards. Our institutional investors are often interested in continuing to invest through later rounds of funding, so we are introducing them to companies early in their development,” he added. Corporate LPs in WaldenVC’s two funds include: America Online Inc., Apollo Group Inc., Electronic Arts Inc., Gartner Group Inc., New Line Cinema, a division of Time-Warner Inc., the Times Mirror Co., now part of the Tribune Co. and The Washington Post Co.
To date, Fund II has backed five deals for a combined total of approximately $20 million to $25 million, Berliner said. The addition of Marcus and a new associate bring the number of investment professionals at the firm to seven including five general partners, one vice-president and an associate.