Netflix Backer TCV Hits $900M with Fund V –

Technology Crossover Ventures (TCV), the Palo Alto, Calif.-based firm that brought Expedia and Netflix Inc. to life, closed its fifth fund with $900 million in February.

This fund is half the size of the one that came before it – a $1.7 billion vehicle that TCV raised in 1999. Nevertheless, it will invest in the same market segments using the same investment strategy. But some things at TCV have changed.

The firm has reduced the size of its partnership. There are now eight general partners at TCV, down from the 10 that managed TCV IV. Carla Newell and Mike Linnert are no longer with the firm. However, TCV has added one venture partner and one entrepreneur-in-residence to its investment team.

TCV V will fund later-stage and expansion stage companies, reserving some capital for PIPE deals. It will invest up to $25 million in each portfolio company. TCV expects to have up to 35 companies in its portfolio once the fund is fully invested.

TCV V will invest in software, technology services, systems and semiconductor companies. It will be looking especially close at deals that tap into spam management, network security, and telecommunications systems technologies. It will also invest in business processing outsourcing deals.

The firm’s $417 million 1999 fund, TCV III, posted a net IRR of 17.10%, according to one limited partner, the California Public Employees’ Retirement System. TCV IV, a $1.7 billion fund closed in 1999, has returned 0.60% to its investors.

In addition to CalPERS – which is an investor through its partnership with Grove Street Partners – limited partners in TCV V include BancBoston Capital, General Motors Corp., Hewlett-Packard Co., New Mexico State Investment Council and Rho Management Co.

Founded in 1995, TCV manages $3.3 billion and has made investments in 140 companies.

– Carolina Braunschweig

Banking on Venture Again

In a signal that the health care and life sciences markets are robust enough to bring some players back into venture capital, a new fund has been born from a marriage of a bank and a corporate venture group. Commerce Bancorp (NYSE: CBH) joined with Barr Ventures, the venture and development unit of Barr Pharmaceuticals (NYSE: BRL) to launch Commerce Health Ventures.

The fund, announced in January, is based in King of Prussia, Pa., and had raised $25 million at last count. Commerce Bancorp invested $10 million and Barr Pharmaceuticals invested $15 million.

The fund has a goal of $150 million and expects to have its final close before the end of 2004.

Robert Falese, Commerce Bank’s chief lending officer, says he expects to count major health care institutions and pharmaceutical companies among the fund’s limited partners, as well as traditional LPs, such as pension funds and endowments.

The new fund shares three of its partners with NewSpring Ventures, a venture firm also in King of Prussia. Three other partners are located in New York, and Commerce Health Ventures plans to set up an office in New Jersey by the end of the year.

The fund will divide its deals equally between life science and health care services. The major health care sectors that the fund will focus on are the central nervous system, diabetes, obesity, oncology and reproductive health.

The fund will invest in companies that are based between Boston and Washington D.C., which is roughly the same scope of Commerce Bancorp’s operations. The fund is expected to have a 10-year life and its investments will fall in the $2 million to $10 million range.

The new fund has already closed one deal. Commerce Health Ventures contributed $1 million to a $4 million investment in Scandius BioMedical, a Littleton, Mass.-based developer of surgical instruments that specializes in treating athletic knee injuries. Commerce Health co-led the deal with KBL Healthcare Ventures.

Although 2004 promises to be an active one for medical device investments, the data collected so far does not show 2003 being an up year for the sector. The first three quarters of 2003 saw slightly over $1 billion invested in medical devices, compared to $1.4 billion invested in the sector for the first three quarters of 2002, according to Thomson Venture Economics (publisher of VCJ).

– Matthew Sheahan

Masthead on Top with First Fund

Early-stage venture investor Masthead Venture Partners closed on $160 million in January, holding out for another $20 million before it makes a final close on its inaugural fund later this year.

The Manchester, Mass.-based firm plans to invest between $3 million and $8 million in 18 to 22 startup companies.

The firm plans to invest largely in the information technology sector, doing deals in enterprise software, corporate and content security, consumer Internet, sensor networking and communications infrastructure.

However, Masthead says it will reserve as much as 15% of the fund for investments in life sciences information technology.

The fund has four companies already in its portfolio and plans to add at least two more within the next two months, says Richard Levandov, a general partner with the firm.

Still, the four companies – Liquid Machines Inc., RuleStream Corp., Nexaweb Technologies and SyChip – account for only $10 million in invested capital.

The firm will continue to scout early-stage investments. Masthead will also do later-stage financings – Series B and Series C rounds – on an opportunistic basis.

Founded in 1997, the firm has 10 investments under management, though each previous deal was financed by the firm’s limited partners on an as needed, deal-by-deal basis.

Fund-raising for this fund began in mid-2001, and limited partners include university endowments, family trusts, financial institutions and individual investors.

Levandov will manage the fund alongside five other general partners – Brady Bohrmann, Daniel Flatley, Robert Foster, Brian Owen and Stephen Smith. Masthead also announced it will move its offices to Cambridge, Mass. in April.

– Carolina Braunschweig

Venrock Locks up New Fund

Venrock Associates, the venture firm started by the Rockefellers in the 1930s, announced in January it has raised $550 million in new capital and added Anders Hove and Michael Feinstein as new general partners.

Hove is the former CEO of BB Biotech/Bellevue Asset Management of Switzerland, and will focus on biotech and medical device investments out of Venrock’s New York office.

Feinstein will focus on IT investments out of Venrock’s Cambridge, Mass., office. He previously served as a general partner with Waltham, Mass.-based Atlas Venture.

The pair partially replaces the four Venrock pros who have left since the firm’s $656 million third fund was raised in 2000.

Gone are GPs David Hathaway and Joe Casey. Venrock GP Tom Frederick resigned and Terry Garnett left to launch a new technology-based buyout firm with former ComVentures partner David Helfrich.

Limited partners of the new fund, according to Venrock, include members of the Rockefeller Family and associated entities as well as endowments and foundations.

Venrock will continue to invest jointly in early stage information technology and health care companies. The firm anticipates that approximately 70% of the investments will be in the information technology industry and 30% in health care and life sciences.

– Alastair Goldfisher