NEW YORK – After one year and just two investments, European incubator inVentures last month decided to officially merge with New York-based search firm Redwood Partners to form a new Pan-Atlantic entity that will provide executive search, strategic consulting and merchant banking services to telecom, media and technology companies.
“We studied all of our possible options in quite a bit of detail before deciding on this course,” said inVentures Founder and Chief Executive Officer Gregory Bedrosian. “InVentures was very hands-on and partnered with a lot of companies, but what we found on the human capital side was that we would be better served by combining our efforts with an existing search firm rather than just bringing in one or two executive search people on our own.”
Bedrosian will stay on as co-CEO of the new firm, which has been dubbed Redwood Partners International. Of the 106 professionals expected to be on the company’s roster by year-end, about 15% will be dedicated to investment activities. Bedrosian reported that Redwood has already seen some decent deal flow, although it has yet to formally launch marketing efforts on its new investment vehicle, which will be pitched with a target capitalization of $100 million. Most investments are expected to come from corporations, while a portion of inVentures’ founding $25 million will also be carried over into the new Redwood fund.
Average investment size will range from $5 million to $10 million, although that most likely will not include in-kind executive search or consulting services.
“The two activities are being kept at arm’s length from each other,” said Michael Flannery, who will join Bedrosian as co-CEO. “We’re creating the VC fund to make good investments, not so that the executive search side can sell under-priced services. Those are already cash-flow positive.”
Before the merger, inVentures funded both eHospitalEurope and eLabs Europe. It was also in discussions with a trio of wireless application businesses, but those have now been put on hold.
More Merger Activity
In other merger news, Washington-based Core Capital Partners and GCI Venture Partners formed an official alliance last month after years of informal partnership.
“We have been working with them and investing together in deals for years. Our philosophies are very similar,” said Mark Levine, the former managing director of GCI and new managing director of Core Capital alongside Jonathan Silver and William Dunbar.
Although the merger is official, the companies are still working separately and will continue to do so until their previous funds are fully committed. However, that doesn’t really mean much because, in general, Core Capital leads many of the deals GCI invests in. “In every deal, my smaller fund and their larger fund will join as separate entities for now. Right now our management is combined but not funds,” Levine explained.
GCI’s $25 million fund was raised in late 1999 and has only committed a few million dollars to date. Core Capital’s last fund of $160 million was raised in early 2000 and still has $120 worth of dry powder remaining. However, during the first quarter of next year, as a totally united company, Core Capital will raise its first fund, which is expected to top off at about $180 million.
The new company’s investment strategy will be similar to Core Capital’s previous model. It typically does series A and follow-on investments, with first-round deals, ranging from $2 million to $5 million.