BOSTON – With approximately 90% of its ninth venture fund committed, Greylock Management Corp. intends to raise its tenth fund in the next three to six months, with a likely target of $400 million, said General Partner Aneel Bhusri.
While most firms typically initiate the fund raising process after current funds are 75% invested, Greylock condenses its fund raising cycle by marketing almost exclusively to its existing limited partners. However, the firm intends to recruit one new institutional limited partner to the new fund.
“We haven’t opened it up to anything new in a few years and have had the same core group of investors for the last 30 years,” Bhusri said. “We will allow one new major LP to come in, and [we] will let our entrepreneurs invest at a small level.”
Although Oak Investment Partners and Benchmark Capital each raised $1 billion funds in the last few weeks, Greylock plans to keep Fund X at a comparatively modest $400 million. The “smaller” investment vehicle is designed to exploit earlier-stage investment opportunities that the larger funds may disregard.
“Our belief is that when you raise too much money, it’s hard to put it to work in the first round,” Bhusri said. “It’s hard to put $1 billion to work and still be an active member of a board of directors.”
He added that an increase from the $220 million Greylock IX will enable the firm to allocate larger amounts of capital to later-stage opportunities, but “also be ready and willing to put $2 million in a start-up.”
Recent investments include Phone.com, which raised $64 million in an initial public offering in June, and Space.com, which is commanded by former CNNfn president Lou Dobbs.
Greylock Leads Investment
Greylock in October led the first institutional round of financing for HelloAsia.com. The company, which has offices in San Mateo, Calif., in addition to four Asian-based offices, is a Web-based service that compensates Asian Internet users for communicating and conducting transactions over the Internet by providing cyberpoints, which are redeemed for the rewards of their choice. Greylock contributed $7 million to the $20 million round.
“The marketplace in the U.S. in terms of Internet opportunities is still active and exciting, but is becoming a little saturated,”Bhusri said. “This company is taking U.S. concepts and tailoring them to Asia. You know the penetration in Asia will grow, and it is time to take advantage of interesting opportunities.”
Bhusri, who moonlights as vice chairman for PeopleSoft, said he was particularly impressed with the background of HelloAsia’s founders, who started their first company while at Harvard Business School.
Chief Executive Chih Cheung and Chief Operating Officer Henry Ellenbogen have established strategic partnerships with Asian-based entities including Chinatrust Commercial Bank, LG Securities, Singapore One – whose chairman sits on the HelloAsia.com board – and Warner Music Asia Pacific since forming the company last October.
Additional investors the company recruited without the benefit of a placement agent include H&Q Asia Pacific, TMCT Ventures, Critical Path Inc. and Intel Corp. HelloAsia.com previously raised $1.2 million in an angel round.
“This funding will allow us to go out to market and introduce products and services to consumers,” Ellenbogen said. “We will have a limited amount of quality strategic partners in each country.”
The investors are banking on the reward system’s ability to be the harbinger of increased Internet usage in the region.
“Many successful Web players are commonly using incentives to increase customer loyalty to their service, whether it comes as direct rewards or frequency benefits,” said Pete Hitchen, Internet Analyst for IDC Asia/Pacific. “The barrier of this service is the suspicion of users, the attitude of nothing comes for free’ often emerges.”
As for raising future cash, HelloAsia.com is funded through the next several quarters, and has no specific timetable for future rounds of either private or public financing.