BOSTON – Highland Capital Partners recently held a first and final close on its fifth venture capital fund, garnering $500 million in commitments from more than 25 limited partners.
In conjunction with the close, the firm has begun to expand its staff with the promotions of Jo Tango and Sean Dalton to general partners. Dalton was recently promoted to principal from senior associate (VCJ, November 1999, page 40).
Fund raising for Highland Capital Partners V LP stayed true to the firm’s intention to add new institutional limited partners to each fund, while keeping the bulk for existing LPs, said Robert Higgins, managing general partner at the Boston-based firm.
“We let [existing LPs] know in mid-November, and within a couple weeks we knew where everybody was,” Higgins said. “We wanted to add institutional partners and spent a lot of time expanding our Entrepreneur’s Fund.”
The Entrepreneur’s Fund is a vehicle Highland designed to give individual investors the opportunity to invest in deals alongside the institutional fund. Geared toward individuals with experience that can add value to Highland portfolio companies, Higgins said the minimum investment for the Entrepreneur’s Fund is $100,000, as opposed to the $5 million minimum for the institutional fund.
Institutions that ponied up for the fund include Harvard University, the Massachusetts Institute of Technology, Stanford University, Yale University, the Ford Foundation, Hewlett-Packard and the Mayo Clinic. Higgins said the firm also added several European institutions to the LP group.
Regarding the investment strategy for the fund, Highland will continue to target Internet, communications and health-care companies. Higgins noted that after seeing a dearth of health-care investment opportunities over the past few years, there was an “intriguing” amount of new interest in the sector.
The firm increased its general partner base by two, promoting Tango and Dalton to general partner.
Tango, who joined the firm in 1998, focuses on business-to-business and business-to-consumer commerce. His expectation for the near term is for increased merger activity among Internet companies.
“There will be a couple sources of deals,” he said. “Existing companies will want to acquire an online channel, and start-ups that want to consolidate to improve their product mix.”
Dalton, who also joined the firm in 1998, focuses his efforts on data communications companies, an area Highland intends to expand through Fund V. He said the firm planned to hire Martin Mengwall as a senior associate in the communications practice in conjunction with the close of Fund V. Future hiring plans call for the firm to add one additional principal.
Dalton said investment opportunities for the communications sector include the full range of optics companies, from components to equipment.
“Personally, I am excited about chip deals,” Dalton said. “Two years ago, when creating new equipment, you needed value [throughout the product]. Now datacomm companies focus on one or two aspects where they do well, and the rest is system integration.”