Idealab Hires Kauffman Fellow –

LOS ANGELES – One-year-old Idealab Capital Partners L.P.(ICP) seems to be approaching the venture capital market as a sprint rather than a marathon.

While many first-time funds breathe a mighty sigh of relief at a final close and get to the business of investing, the venture capital affiliate of the incubator idealab! plans to launch a $150 million second fund by year-end and is adding a fourth investment professional.

William Quigley, a Kauffman Fellow with Mid-Atlantic Venture Funds, will join ICP as a principal in late April. The three other members of the investment team are co-founders Bill Elkus and Bill Gross and principal Jim Armstrong.

During his two years at Bethlehem, Pa.-based Mid-Atlantic, Mr. Quigley made eight investments – five in communications, two in e-commerce and one in an embedded systems company. At ICP, he will seek to broaden the firm’s focus to include more communications-oriented deals alongside the Internet-related companies that currently account for the vast majority of its current portfolio.

“There are little pockets of companies sprouting up in some of the beach communities, and I will look at those,” he said.

Prior to obtaining his MBA from Harvard University Business School, Mr. Quigley served as co-head of the merchant banking group at The Walt Disney Corp. In that role he negotiated equity relationships between the company and its licensees, whetting his appetite for the venture market.

Separately, in mid-February the firm held an $18 million final close on its first fund, bring the total capitalization in the first-time effort to $105 million, Mr. Elkus said. Moore Capital Management was the lead investor on the fund. Other limited partners included Grove Street Advisors, making its first investment on behalf of the California Public Employees’ Retirement Systems, the State of Michigan, Union Bank, SunAmerica and its chairman Eli Broad, Times Mirror and Sumitomo Bank.

The terms on the fund were an 80%/20% carried interest split and a 2.5% management fee. The minimum investment was set at $5 million, although Mr. Elkus said the fund made some exceptions.

ICP has already committed $45 million from Fund I and is therefore beginning to plan its next effort. Mr. Elkus said Fund II would be launched in the next six to nine months with a target of $150 million. Being so early in the game, the structure of the fund has not yet been determined. However, the managing director said terms would likely remain the same, although there would be no exceptions to the minimum commitment level next time.

“We will probably take the path of least resistance and pass the hat to existing investors and other groups that wanted into this fund,” Mr. Elkus said.

Without a doubt, ICP is investing the fund quickly, but the firm is positioned to realize some early returns as well. One portfolio company, Etoys Inc., filed for an initial public offering with the Securities and Exchange Commission on Feb. 17, and Mr. Elkus said two others companies are on the precipice of filing.