MENLO PARK, Calif. – Less than one year after rising from the ashes of an orchestrated exodus from Brentwood Venture Capital and Institutional Venture Partners (IVP), Redpoint Ventures announced in August that it held a $1.25 billion final close on its second investment vehicle. The news not only leapfrogged the Silicon Valley-based firm over a number of more-established venture players in terms of capital under management, but it could also provide significant flexibility when it comes time to bid on deals within today’s red-hot infrastructure sector.
“The [market] pressure’s not on reaching the $1 billion mark, but on determining how many companies we’re going to be able to fund,” said Tom Dyal, a founding partner of Redpoint Ventures. “We just think that the ability to support some of those big infrastructure deals with $15 million to $20 million investments, and being able to do it comfortably without overextending or exposing ourselves, is tied in with having a large fund.”
The firm’s previous vehicle was the $600 million Redpoint I, which closed last November and has made recent investments in companies like broadband interactive television provider MetaTV, intellectual capital exchange HelloBrain.com and digital audio software developer MusicMatch Inc. Thus far, none of the first fund’s 27 portfolio firms have executed a successful exit – a situation exacerbated by the Nasdaq’s continuing hostility toward new issues.
“It’s still too early in Redpoint I to tell what the hits or misses will be,” Dyal said. “The average life of our current portfolio company is just six months old, so most of them are still far too early-stage to be going public.”
He added that he expects to see some exits over the next year, although he said it was too early to speculate on which companies would be heading out.
The new fund will continue the first vehicle’s focus on the type of Internet infrastructure plays that make up approximately 60% of Redpoint’s current investments. It will, however, shy away from some of the online media and business-to-consumer dotcom spin-out investments that seemed so certain last November, yet so unfavorable today.
“There’s been an emphasis shift and those types of companies just aren’t receiving too much attention right now,” Dyal said.
Limited partners in the new fund are, for the most part, the same investors who participated in Redpoint I and previous Brentwood and IVP vehicles. Among the more notable names are Horsley Bridge Partners, the Duke Foundation and Harvard University. The fund also brought in a handful of new LPs, including HarbourVest Partners, Notre Dame University and the Georgia Institute of Technology.
In addition, the firm will likely soon begin raising a side fund like the $100 million Redpoint Technical Partners Fund that accompanied Redpoint I. That vehicle, however, is not yet fully-invested and has the flexibility to co-invest with Redpoint II.
“The side fund has different dynamics [than the general fund] in that it’s from a set of individuals and is on a different time cycle,” Dyal said.