Continuing the trend of hedge funds targeting early stage venture deals, Crosslink Capital has raised $300 million of a $600 million fifth fund that will invest equally between venture deals and hedge fund-like public market investments.
The fund is slated to close in the fall and is more than double the size of its $280 million Crosslink Crossover Fund IV, which was raised in 2003.
The San Francisco-based firm currently invests from three parallel vehicles, including one that invests in public companies, one that invests in startups and a third that splits its money between the other two funds. The majority of the money from fund V will go toward public market investments. The venture team expects to call down money from the hedge fund team as the fund matures.
In 1999 and 2000, the Crosslink hedge fund returned 60% and 40%, respectively. But it returned only 1.5% in 2001 and lost 8.4% during 2002. It picked up in 2003, returning 25.7% and leveled off at 9.6% in 2004 and 13.7% in 2005, according to previously reported numbers from one of the firm’s internal marketing memos. Crosslink says those numbers are inaccurate, saying they have not been updated since 2005, but it declined to provide updated figures, citing regulatory concerns.
Crosslink is one of several hedge funds increasingly investing in early stage tech companies.
Goliath asset manager AllianceBernstein, which operates hedge funds totaling $7.2 billion, invested in five venture deals in the second quarter, after doing just a single VC deal in all of 2006. It participated in a $32 million Series D round for drug maker Metabolex, a $40 million Series F round for camcorder maker Pure Digital Technologies, a $70 million Series C round for drug company Portola Pharmaceuticals, a $26 million Series C round for molecular imaging company Avid Radiopharmaceuticals, and a $20 million Series B round for life sciences company Artificial Muscle.
D.E. Shaw Group, which manages $26.3 billion in hedge funds, has also been active. It did four deals in Q2 alone, backing email encryption maker PGP in a $27.3 million Series C, semiconductor company WiQuest Communications in a $28 million Series C, ringtone service company Emotive Communications in a $7.7 million Series A, and silicon maker Solaicx in a $27.1 million Series C.
Not to be left out of the action, $1.3 billion Silicon Valley hedge fund Palo Alto Investors invested in two medical startups in Q2. It backed drug company Talima Therapeutics in a $19 million Series B and medical device company Paracor Medical in a $44.35 million Series D. —Alexander Haislip