UTRECHT, THE NETHERLANDS – Having deployed E35 million ($35 million) of its E50 million ($50 million) Converging Technologies Europe fund in 12 companies in less than two years, NeSBIC Groep plans to go to the market this month with a E150 million ($152 million) successor fund.
The new fund, NeSBIC Converging Technologies e-commerce Fund II (CTe II), will focus on communications and Web-enabling software and will place a greater emphasis on e-commerce opportunities than its predecessor. To enhance its ability to support investees in the e-commerce sector, NeSBIC is currently working to establish a partnership with “a local, reputable” venture group in Palo Alto, Calif.
Managing General Partner Robert Wilhelm, who declined to identify NeSBIC’s potential partner, said NeSBIC will establish a small local presence in Silicon Valley by “co-locating” with its U.S. partner. The object is not to compete with local venture firms, but to establish a position from which to observe successful e-business models that can be adapted to the European marketplace, Wilhelm explains. A Silicon Valley presence also will help NeSBIC portfolio companies address the vital U.S. market.
Although CTe II’s target has been set at E150 million – three times the size of the group’s first converging technologies fund – Wilhelm said he would not be surprised if it raised as much as E200 million ($201 million).
This rapid scaling-up is symptomatic of the Internet fever sweeping the European market. Wilhelm does not seek to underplay the risks inherent in such a marketplace, admitting that the sums being raised for e-commerce investments are driving valuations ever higher. “Everyone wants an e-commerce fund; at a time like this, when valuations are becoming inflated, judgement calls are very important.”
To invest the new fund, NeSBIC is seeking to add five senior executives to its technology investment team, which currently comprises four investment directors. Two senior telecommunications executives already have been recruited. “We are looking for people with operational backgrounds in the industries we invest in,” Wilhelm said.
While the new fund will focus more closely on e-commerce than the current vehicle, its geographic focus will expand beyond the Benelux countries into the wider European market. Accordingly, NeSBIC hopes to secure a broader investor base including more international players for the new vehicle; the first CTE Fund was raised primarily from domestic pension funds and institutions.
NeSBIC’s cornerstone investor, Fortis Group, will act as fund sponsor and has lined up a commitment of euros 50 million.
The first NeSBIC CTe Fund, which has backed companies including VersaTel Telecom International NV, EC-Gate NV, Scarlet Telecom BV and Altitude Software, at the end of September had achieved a realized and unrealized IRR of more than 100% across the entire portfolio.