WASHINGTON/NEW YORK – Created to serve a marketplace gap created by the growing number of billion dollar mega-funds, NextLevel Group at the beginning of January launched its freshman fund, the $60 million to $100 million-targeted NextLevel Venture Partners LLC, said Rahul Bhandari, managing director. Bhandari declined to reveal the vehicle’s target amount for a first close or when the initial close was slated to occur.
The marketplace niche NextLevel wants to fill is created by two factors, Bhandari said. General partners at mega-funds do not have the bandwidth to work closely with their portfolio companies because of the time crunch involved in putting such a large amount of capital to work, he said. Moreover, a large number of these funds are spending more of their time and money working to prop up their existing portfolio companies, which means there are other good companies that need money and are not getting funded, he noted. Taken together these two developments mean there is enough marketplace need to support the creation of NextLevel, he added.
Bhandari formed the new venture capital firm in December with Joe Heller, who is also a managing director. Prior to NextLevel, Bhandari co-founded Accenture’s (formerly Andersen Consulting) Business Launch Centre. Heller previously had been a vice president at investment management firm Arbor Management LLC. Anita Kaufman, who also helped launched the new venture, holds the title of founding member. She will be responsible for managing the firm’s behind the scenes concerns, Bhandari said. He declined to provide any information on Kaufman’s prior career history.
NextLevel Venture Partners will back early-stage companies in emerging technology industry sectors such as infrastructure, security, software and communications, Bhandari said. “We want to back technologies for which big companies will pay big money,” he added, noting “we want to be involved with companies that provide real solutions to real problems with quantum leaps, not incremental efficiencies.” The fund, if it meets its $100 million target, will back 20 companies with up to $5 million over the life of a deal. NextLevel will participate mainly in series A rounds and will not make any seed-stage investments, he said.
The new firm will focus on finding deals on the East Coast within about one hour’s plane flight of its offices in Washington and New York, Bhandari said. “Because we really want to work with our early-stage companies, they need to be reasonably close to us,” he added. In working with its portfolio companies, NextLevel will follow what it has termed its Soft-Syndication strategy when investing its new fund, he said. Following this strategy the firm will take a structured approach to shaping a company’s business model and laying out the milestones it needs to hit in order to achieve a next round of venture funding, he explained. The Soft-Syndication strategy will aid the new fund’s portfolio companies in part through a network of professional service firms with which NextLevel will establish relationships. The firm has already entered into a relationship with TalentCatch Inc., a management recruitment firm, to help its future portfolio companies recruit managers, he added.
NextLevel is not nervous about enduring a rocky fund-raising process, Bhandari said. “Joe and I walked away from substantial positions to do this, and we wouldn’t have left our previous jobs if we weren’t confident,” he added. Because of the risk reduction with the firm’s structured approach to VC, potential limited partners have been very receptive to the fund, he added. Bhandari declined to identify any LPs, beyond saying the firm was hoping for a mix of institutions and high-net-worth-individuals. He also declined to disclose how much capital the new vehicle had raised to date.
The firm’s investment team currently consists solely of Heller and Bhandari. Over the next few months, the firm will be looking to build out its investment staff by adding a few junior level professionals to both of its offices, he added.