SAN FRANCISCO – Don’t say the well is dry. Horsley Bridge Partners is sitting on over $3 billion that will eventually be committed to venture capital funds.
Phil Horsley, managing director, said the fund-of-funds shop held final closes on a domestic fund and an international fund in December.
In June 2000, the firm began marketing the $2 billion-targeted Horsley Bridge VII, the domestic fund, and held a $1.5 billion first close in July, subscribed by all the investors of Horsley Bridge VI. In 1999, HB VI had raised $1.3 billion including a sidecar for European investors.
Horsley Bridge continued marketing HB VII to new investors through the end of the year, raising a total of $2.5 billion by the final close. Horsley added that the fund may actually pick up another $100 million from an institutional investor that had not secured internal approval for the investment by the December deadline.
The firm intends HB VII to invest in domestic VC firms targeting early-stage investments. Horsley said the fund is flexible and may end up with a few investments outside that category if, for example, HB VII invests in a global VC firm focused on the U.S. The fund will not be industry specific.
“Today’s venture capitalists are pretty much focused on information technology, so that’s where it will likely end up,” Horsley said, adding that last year it probably would have ended up in Internet-related investments.
He expects to invest between $10 million and $150 million into portfolio VC funds, but legally the firm can invest as much as 10% of HB VII’s total capital in a single investment. He added the average investment would be about $75 million.
The firm does not set a standard for the portion of limited partner interest it seeks in its portfolio VC funds. Horsley said the firm has made investments that represented as much as 25% of a fund.
HB VII has not committed its capital to any VC funds, and Horsley said it is “clearly not” a foregone conclusion that the firm will invest in a VC firm it has previously supported.
Horsley Bridge International II followed the same fund-raising schedule as HB VII. The fund originally targeted $500 million and closed on $520 million, but this fund also has $300 million outstanding that was delayed by bureaucrats.
HBI II will invest in VC firms outside the U.S., focusing on Europe, Israel and up to 25% in Asia. The firm’s two person London office will help deploy the capital. Horsley said most of the international fund’s investors are from the domestic fund, but not all of the domestic fund’s LPs chose to participate in HBI II.
“It’s not a lot of fun to raise two funds at once,” Horsley said. “In the end, it’s a help. You end up doing probably less than twice the work.”
Horsley said he ran across 55 other funds-of-funds that were raising money in 2000, but when he started 18 years ago, he only knew of one other fund-of-funds in the business.
The firm invested HB VI in one year, however Horsley expects the HB VII to last twice that long.
“If the market cooperates and we get some slow-down, it might be longer [than two years],” he said. “I would be quite happy if it lasted three years.”
The required minimum commitment to HB VII was $50 million, and most of the LPs were pensions plus a few corporations, endowments and foundations. LPs include Xerox Corp., Deere & Co., Rice University and the New York State Teachers’ Retirement System. HB VII also attracted investors from Japan, Australia and the Netherlands.