GKM Ventures formally unveiled its first fund at the end of August, with $30 million from the Small Business Administration (SBA) and $20 million from individuals and institutions. Launched last year, the Los Angeles-based vehicle invests in early and mid-stage companies located in the Southwest United States. It targets companies in the semiconductor, infrastructure, communication, software and digital media sectors.
GKM is affiliated with New York-based Gerard Klauer Mattison, an institutional research and investment banking firm. The idea is that Gerard Klauer Mattison’s operating experience combined with GKM’s network will add value to portfolio companies. Gerard Klauer Mattison is a minority investor in GKM Ventures.
“Our relationship with Gerard Klauer Mattison is the key ingredient that differentiates us from other VCs,” says John Morris, a partner with the fund. “We really leverage their research and expertise to help our portfolio companies. That’s why Jonathan Bloch, who is the founder, named the firm GKM Ventures. He saw the strategic advantage.”
GKM plans to co-invest with VC firms that will roughly split the total amount going into a deal. “A million and a half is our sweet spot, and we will always be investing with other regional funds that invest about that,” Morris says. “We have organized 15 funds in Southern California to share deal flow and resources. We bring deals to the table in hopes of getting co-investors interested. We aren’t interested in investing with some mega-fund.”
To date, GKM has invested less than 10% of its fund and is actively pursuing new investments. Its portfolio includes HelloNetwork, a streaming video company; Silicon Bandwidth, a semiconductor company; and Trendium, an enterprise software company. GKM also made a strategic investment in ITU Ventures, a seed-stage venture fund.
Morris expects the fund to be fully committed by 2004, with 15 to 18 portfolio companies. “We see ourselves with a follow-on fund in 2004 or 2005,” he says. “Right now, we’re trying to build companies in the Southwest community and make sure they’re attractive to corporate players-because you can’t count on IPOs.”