BOSTON – Pioneer Group Inc. (PGI), a manager of mutual funds and institutional investments, in late March is slated to sell its interest in the firm’s venture arm, Pioneer Capital Corp., to an undisclosed “reputable name” in the secondary market, said venture group General Partner Walter Dick.
“The decision to sell the VC interests accommodates the wishes of Pioneer Capital Corp.’s managers, who want to raise a large, independently managed venture fund and believe at this time it is only possible to do so outside the corporate umbrella,” Mr. Dick said. “The decision is also consistent with a PGI objective of freeing up resources for additional investments in PGI’s core businesses.”
Pioneer Capital Corp.’s purchaser will buy the PGI-funded vehicles and the venture firm’s stakes in related portfolio companies; however, PGI’s four G.P.s will continue to manage the investments. Mr. Dick noted that the undisclosed buyer had committed to providing additional capital to support existing portfolio companies.
The venture unit has three funds and about $130 million under management. The first two vehicles being sold are evergreen funds created with capital from Pioneer. The third fund, a $60 million vehicle raised from outside investors, closed in 1995, Mr. Dick said.
Returns in the last 14 years have been in the percentage range of the high 20s to low 30s, on a compounded basis, Mr. Dick noted.
Canaan Venture Partners and Pioneer have co-invested in several deals, and Canaan Prinicpal Jim Furnivall calls Pioneer “a solid player in the venture capital business.”
By gaining independence, Pioneer will “remove a level of distraction,” allowing the team to thrive even more than it has, Mr. Furnivall predicted.
Pioneer Capital Corp. backs companies in diverse industries at all stages of development, including earlier-stage technology deals in telecommunications, software and medical services sectors. Pioneer also invests in later-stage low-tech enterprises, including industrial manufacturing and publishing concerns. About 30% to 40% of the group’s capital is geared toward later-stage, low-tech strategy deals, which includes leveraged buyouts, recapitalization and turnarounds.
The group plans to raise $100 million to $150 million in the near future, Mr. Dick said.
Pioneer Capital Corp. was created as a one-man operation in 1980 and expanded in 1985 to four general partners. Each of the G.P.s – Frank Polestra, Christopher Lynch, Leigh Michl and Mr. Dick – individually has at least 10 years experience in venture capital, Mr. Dick said. The group had not chosen a new name by press time.