REDWOOD CITY, Calif. – Labrador Ventures is currently raising its fifth and largest fund, the $180 million-targeted Labrador Ventures V LP. The firm began raising the fund in November and will cap it at $250 million.
“I doubt, if adjusted for inflation, we will ever go above $250 million or $300 million,” said Larry Kubal, founder of Labrador.
Kubal said he expects to hold the first close on the fund by late April, but he would not comment on the progress of the fund-raising to date or speculate if the April close would be the final close.
The firm likes to invest small amounts in early-stage companies with low valuations. A typical first round investment for the firm might be $2 million invested in a small, incomplete management team with a pre-money valuation of under $5 million, he said.
Labrador is serving a market under the radar of larger VC funds probably wanting to invest at least $10 million, he added.
Labrador’s specialty is working with young companies: mentoring management, adding executives to the teams and introducing the companies to strategic relationships, Kubal said. The firm claims to have found success working with first-time entrepreneurs, although that is not their focus.
In order to give young companies adequate attention, the four partners in the firm limit themselves to six boards, usually rotating off by the series C round.
Launched in 1999, Labrador Ventures IV LP has invested in 11 companies with about four to go. Kubal said a number of the $90 million fund’s portfolio companies are nearing their second funding rounds.
The firm’s two previous funds, 1998’s Labrador Ventures III LP and 1995’s Labrador Ventures II LP, have returned respective net IRRs of 200% and 75% as of December 2000.
Kubal expects Labrador V ultimately to invest in 20 to 25 companies depending on the size of the final close, and he expects the fund to invest at a pace of 10 to 12 companies per year.
The firm added a New York office in anticipation of the fund (VCJ December 2000, page 44) and initiated the Industry Partners Program. Under the program, four business people will assist with industry-specific investment responsibilities at the firm for a cut of the general partners’ carry and a deal-by-deal commission.
Ashok Jain, founder of Internet Devices Inc. (acquired by Alcatel in 1999), will assist Labrador in the data communications sector. Mike Santullo, founder of Four11 Corp. (acquired by Yahoo! Inc.) will review investments in Internet information services. Strauss Zelnick, former president and chief executive officer at BMG Entertainment, will work with digital rights management companies, and Ron Lachman who wrote early coding for the Internet will advise the group on Internet infrastructure companies.
The firm focuses on these sectors and other information technology groups such as semiconductors and software.
According to the firm’s Web site limited partners on previous Labrador funds have mostly been individuals, but Kubal said Labrador V will add endowments, funds-of-funds and pensions. The GPs plan to invest $10 million in the fund which will have a 2.5% management fee and an 80%/20% carried interest structure.
Depending on the final close, Kubal said the firm may add another seasoned associate or partner to its California office.