Menlo Ventures Wraps on $1.5B –

MENLO PARK, Calif. – Menlo Ventures held a first and final close on its ninth venture fund, the $1.5 billion Menlo Ventures IX, on July 12, surpassing its initial target of $1 billion, said H. DuBose Montgomery, a managing director at the firm. The firm launched the vehicle in May, he added.

Menlo Ventures will target early-stage communications, software and Internet companies, throughout the U.S., Montgomery said. The firm expects to invest up to 50% of the fund in communications companies, 35% in Internet infrastructure and applications companies, and 25% in software enterprises. Fund IX will back about 60 companies, with investments ranging between $15 million and $25 million, over several rounds, he said.

At press time, the firm’s previous vehicle, the $500 million Menlo Ventures VIII, which closed in May 1999, was about 75% invested in about 27 companies. The firm plans to back another six companies by the fourth quarter, at which point it will transition into investing Fund IX, Montgomery said.

A number of Menlo Venture’s portfolio companies recently held initial public offerings: F5 Networks Inc. in June 1999, Efficient Networks Inc. in July 1999, Digital Insight Corp. and Vixel Corp. in October 1999, iBasis Inc. in November 1999, and Eloquent Inc. in February.

The firm’s limited partners in Fund IX included a group of long-standing investors in the firm, such as Washington State Investment Board, Pathway Capital, HarbourVest, Horsley Bridge Partners, the State of Michigan and FLAG Ventures. Menlo Ventures retains a 2.5% management fee and a 75%/25% carried interest structure, Montgomery said.

Menlo Venture’s six managing directors are Douglas Carlisle, John Jarve, Thomas Bredt, Sonja Hoel, Mark Siegel and Montgomery. The firm planned to hire an additional managing director and two new analysts in August, Montgomery said, explaining that the firm needs more manpower to manage the new vehicle, which is three times the size of its predecessor.