Huge fund makes August flexible

At a time when many other venture firms are having trouble raising money, August Capital raised the largest fund in its 14-year history—and the biggest fund of the first quarter—in less than four months.

The Menlo Park, Calif.-based firm started fund-raising last December and held a final close on $650 million in mid-March, says General Partner David Hornik.

The speed and size of the fund-raising are a bit surprsing given that August hasn’t had a big liquidity event for several years. Most recently, it sold portfolio company Reconnex, a provider of data loss prevention solutions, to McAfee for $46 million in July 2008, according to Thomson Reuters (publisher of VCJ). Reconnex had previously raised $36 million from August and others. The most recent public offering for an August Capital portfolio company was in February 2004, when wireless component maker Atheros went public in a $126 million IPO.

Still, August has had its hand in a number of big hits over the years, not the least of which was the leveraged buyout of Seagate Technology. August joined with Silver Lake Partners and Veritas Software in taking the disk drive maker private in 2000 in a complex $20 billion deal, then took it public again in 2003, reaping billions for the investors.

The firm’s historical track record allowed it to raise $100 million more than it did for its fourth fund in 2005.

Hornik and his partners wanted a large fund to have the flexibility to invest across all stages, from early stage to PIPEs to management buyouts. “We can invest as much as several hundred million dollars in a single deal if we feel it is sufficiently compelling—and we intend to actively investigate those opportunities,” Hornik says.

The firm will “continue to invest over the range of information technologies,” such as software, consumer products, hardware, networking gear and microprocessors, he adds.

For the most part, August’s growth stage investments have focused on companies that have been in its portfolio for many years and that, like many startups in this climate, are still waiting for their exit opportunity.

For example, in January, August participated in a $7 million, late stage financing round for 13-year-old Ubicom, which makes multithreaded processors and software for media applications. August, which was joined by Mayfield Fund, and several other investors, first backed Ubicom in 2004, according to Thomson Reuters (publisher of VCJ).

In late December, August also participated in the eighth round of funding for Openlane, an online automotive auction company. August has been an investor in the Menlo Park, Calif.-based startup since the company’s inception in 2000.

We can invest as much as several hundred million dollars in a single deal if we feel it is sufficiently compelling—and we intend to actively investigate those opportunities.

David Hornik

In recent years, August has steered much of its capital to Web startups. Most recently, the firm invested in the multiplayer online gaming company Ohai in an undisclosed Series A round with Rustic Canyon; in a $5.2 million Series A round for Pixaxxa, a startup that converts Web images into e-commerce links, with co-investor Foundation Capital; and in Aardvark, a new search service started in 2007 by several former employees of Google. Late last year, August led Aardvark’s $5.25 million Series A, which also included Baseline Ventures.

August has also continued to back startups in a variety of other sectors that have historically interested the firm, including networking and microprocessors. In December, August gave follow-on financing to 8-year-old Scintera Networks, which builds products for multi-gigabit communication and networking systems. Scintera has raised more than $33 million in total funding from August, Kleiner Perkins Caufield & Byers, Sevin Rosen Funds and other investors.

In December, August also provided more backing to 4-year-old semiconductor maker DSM Solutions, which has raised $18.7 million from August, Kleiner Perkins and DAG Ventures, among others.

August’s returning GPs include Hornik, John Johnston, Dave Marquardt, Vivek Mehra and Andy Rappaport. Howard Hartenbaum, who left Draper Richards last summer to join August, is a new GP in the fund. —Constance LoizosDEALWATCH: Five recent investments by August Capital

DotNetNuke Corp._Open-source web application framework.

Mechanical Zoo, The_Online social search website.

Ohai Systems_Online multiplayer games.

Swoopo.com_Online auction site.

VideoEgg Inc._Web-based video publishing solutions.

Note: Investments made in March 2009. Source: Thomson Reuters