Kennet gets warm response to third fund

Kennet Partners, a growth-stage investor based in London, has raised more than $150 million for its third fund, which hopes to raise between $250 million and $300 million, VCJ has learned. The firm hopes to hold a final close by the first quarter of 2008.

The firm specializes in non-control, first institutional investment opportunities in information technology companies. Its new fund will be larger than the $215 million second fund it raised in 2001.

The fund-raising, which Kennet started in January, was no doubt buoyed by its bevy of recent exits. It sold wireless communications company Orthogon Systems for an undisclosed amount in May 2006, storage software company Aarohi Communications for $39 million in May 2006, and telecom management software company Cramer Systems for about $375 in July 2006.

Kennet is poised to take advantage of increased interest among institutional investors in growth-style funds. Five of the top 10 largest funds raised during the second quarter were focused on growth. North Bridge Venture Partners closed $545 million toward its first $550 million growth fund during the second quarter. Insight Venture Partners, Institutional Venture Partners, Sequoia Capital China and QuestMark Partners each raised growth funds during the second quarter, as well.Draper Fisher Jurvetson has been working on a $250 million growth fund since the end of December 2005 that has now surpassed its target and was expected to hold a final close in August.

The majority of Kennet’s investments are in companies based outside the United States, as 26 of the 35 companies it has backed since its inception are in Europe while the remainder are U.S.-based. But the firm is looking for new ways to leverage its global presence.

The firm is working with an outsourcing company in India to help with its deal sourcing, VCJ has learned, though the firm is not looking at doing any deals in India. Kennet has hired two people in India to comb through lists of conference attendees and the Internet to find promising investment targets.

Fund-raising appears to have slowed Kennet’s deal making this year. It has made only one investment in 2007, down from seven investments in each of the preceding years, according to Thomson Financial (publisher of VCJ). —Alexander Haislip