JAFCO Snares Naik, 1999’s Top Analyst –

BOSTON – In December, Ullas Naik joined JAFCO Ventures as a managing director. Naik had most recently been closer to the public side of the markets working as an analyst with FAC Equities, a division of First Albany Corp.

Naik received recent attention when Fortune Magazine named him as the top Internet analyst in its July 24, 2000 analyst ranking. The magazine called Naik “an unknown whose recommendations in 1999 gained 800%, nudging aside the sector’s popular talking heads.”

All-star Naik said he enjoyed the public markets, but said the private marketplace was a logical continuation of his career.

“I had had a lot of exposure to companies through their evolution,” Naik said. As a banker, he had brought several companies public. “I found myself fundamentally attracted to that part [private companies] of the market.”

While at FAC, Naik said he had invested in several private companies both on behalf of First Albany and for his own account.

While First Albany recently launched its own venture capital fund, FA Technology Ventures (VCJ, December 2000, page 5), Naik said he was more attracted to JAFCO.

“I was looking for a new start and a company where the atmosphere was entrepreneurial,” Naik said. He said JAFCO interested him because the firm itself was still in its developmental stage, but had raised a large fund.

JAFCO also has a large international focus. Andrew Goldfarb, senior managing director of the firm, said he looked around a table at a recent office party and counted 10 languages that could be spoken.

The first two of JAFCO’s three funds were only subscribed by Japanese limited partners. Naik said he was also interested in the firm because JAFCO had helped its American portfolio companies develop their businesses in Asia.

Goldfarb said JAFCO’s team is strong on operational experience, and he thinks Naik should help the firm’s portfolio companies preserve their post-initial public offering value which is ultimately good for the firm, its LPs and the portfolio companies.

Prior to spending eight years as an analyst, Naik had started his own company immediately after college. When he graduated university in his homeland, India, his family’s financial situation required his support, but he could not parlay the standard jobs available through his organic chemistry degree into enough money.

He formed a chemical trading company called Capricorn Trading. Capricorn was absorbed into a different company when Naik earned a scholarship to get his M.B.A. in the U.S.

At JAFCO, Naik will have the same responsibilities as a general partner. He will also focus on identifying investment opportunities in next-generation technologies and deepening the firm’s relationship with the Indian entrepreneurial community.

Including Naik and Golfarb, the firm has four managing directors. Barry Schiffman and Steve Hill work out of the firm’s Palo Alto, Calif. office. Goldfarb said the firm added four investment professionals, including Naik and vice-presidents David Polifko and David Fachetti, in the last nine months of 2000.

He said the hires were planned following the oversubscription of JAFCO America Technology Fund Series III in March. Goldfarb added the firm had identified one more person it wanted to bring in to complete its recruiting plan.

JAFCO raised $425 million for JATF III, and to date, the firm has invested $120 million in about 25 companies according to Goldfarb. JAFCO invests in all stages, with over half its money targeted at second round fundings. The firm splits its investments among communications, Internet infrastructure, software and systems peripherals sectors.

JAFCO’s investments range from $250,000 to $15 million with the average at $6 million to $8 million per company. Past successes include Avanex Corp., Brocade Communications Systems Inc. and AirGate PCS Inc.