Harvard Revs Up Ignition’s Third Fund –

Thanks to their past jobs and their current connections, the partners at Ignition Partners are on a first-name basis with many of the top execs at Microsoft, McCaw Cellular and Starbucks. But these days it isn’t who you know that counts; it’s whether you can show a return on investment.

So when Ignition went out to shop around its third fund, the LPs were most impressed by the fact that it had three exits from its first fund, a surprising number given that the $140 million fund was born in the midst of the Internet bubble in 2000.

In October, Ignition held a final close on $300 million, about $15 million more than its second fund. The firm could have raised considerably more, but it didn’t make sense because of its focus on seed and early stage deals, says Partner Jonathan Roberts.

“We allowed the fund to grow slightly so could we include some new LPs,” he says. “One of those that we can name was Notre Dame. It was people of that ilk.”

LPs in the new fund include more than 25 leading endowments, foundations, trusts, pension, financial and fund of fund investors. They include the Harvard University Endowment, the Stanford University Endowment and the University of Washington. Roberts declined to name any others.

Because the University of Washington is a public institution, Ignition gave serious thought to the disclosure issue and whether to keep the university as an LP. “It’s an issue that took a lot of attention and a willingness on both sides to work that issue,” Roberts says. He declined to reveal the terms of the agreement that was worked out, but says, “It doesn’t compromise what we believe are the interests of the companies we invest in.”

LPs had to be pleased that although Ignition’s first fund was launched in the spring of 2000, it has had three exits to date: Avogadro was bought by Openwave for about $100 million, Consera was acquired by Hewlett-Packard for an undisclosed amount, and UIEvolution was purchased by Square Enix USA for $58 million.

The firm also hoped to cash out of Seven-which filed to go public last year-but the company has since tabled those IPO plans.

One LP who asked not to be named said he was pleased that Ignition has had some exits but that “doesn’t make them world beaters.” The LP says that he was most impressed by the fact that the partners are honest and professional and “treat their investors with respect.”

Ignition is on such good terms with its LPs that the Harvard University Endowment and the Stanford University Endowment – two high-profile endowments that normally shun the spotlight – allowed themselves to be quoted in a press release about the new fund.

Peter Dolan, head of private equity for the Harvard University Endowment, said in a prepared statement: “Ignition is one of a handful of relatively new venture firms that we have invested in. We are pleased to be a significant investor in both Fund II and Fund III.”

Georganne Perkins, who manages venture investments for the Stanford University Endowment, noted in a prepared statement that Ignition’s partners have “unique operational experience and [a] value-added approach.”

Ignition bolstered its operational expertise with the addition of two partners to its new fund: Robert Headley and John Zagula. Both have been with the firm since mid-2000. Headley joined Ignition from Starbucks Coffee Co., where he spent seven years helping the company with acquisitions and joint ventures. Prior to Ignition, Zagula spent more than eight years at Microsoft in senior marketing and strategy positions, helping develop the Microsoft Office brand, among other things.

They aren’t the only partners with deep ties the industry. John Ludwig is former leader of the Internet Explorer team at Microsoft; Steve Hooper is the former CEO of McCaw; and Roberts, Cameron Myhrvold, Jon Anderson and Brad Silverberg are all long-time veterans of Microsoft.

Ignition’s second fund is close to being fully invested. Roberts wouldn’t say exactly how many deals it has done, except to say that it’s “in the mid-20s” and it has the capacity to do another “handful” of deals.

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