JACKSON, Wyo. – Sapient Capital has reduced the size of its freshman effort and narrowed its focus to health-care investments, following the departure last fall of Principal Noel Rahn, said Mitch Dann, the firm’s remaining principal.
As the sole investor, Dann was forced to pare down the target size of Sapient Capital LP to $25 million from its original $150 million target (VCJ, July 1999, page 5), and he began fund raising late last fall. The vehicle held a $21 million first close in March and Dann expects it to wrap near the $25 million target sometime in the late spring or early summer.
Sapient Capital dropped its original plan to back technology, communications and health-care companies, to invest only in early- to late-stage and public micro-cap health-care companies. The fund will focus on medical device enterprises, but will also consider Phase II or Phase III biopharmaceutical entities and health-care services companies, including e-health businesses.
Sapient Capital plans to back between eight and 10 companies with individual investments ranging from $2 million to $3 million. The firm prefers to invest in companies based in the Western half of the United States.
Rahn left the firm for personal reasons before the partners began fund raising activities. As a sole practitioner, Dann decided to focus exclusively on health care because he is well versed in the field and because the sector accounts for a large percentage of the country’s gross domestic product. In addition the need for health-care products will increase as demographics change in upcoming years.
Prior to forming Sapient, Dann worked at Investment Advisor Inc., where he was a buy-side analyst for one of firm’s mutual funds that invested in both public and private companies. Dann and Rahn worked together to form IAI Ventures, which launched a number of vehicles that backed over 50 companies and 10 venture funds by the time Dann left Investment Advisor to form his own health-care consulting firm in 1991.
Sapient’s limited partners include institutions such as Donaldson, Lufkin & Jenrette Inc., Deutsche Bank Alex. Brown and General Mills Inc., and a network of high-net-worth physicians, industry executives and entrepreneurs. Sapient features a standard 2.5% management fee and an 80%/20% carried interest split, however, the firm is willing to share its carry with members of its investor network as they deliver quality deals. A network member who sources a deal will receive 5% of the firm’s 20% share of the carry, Dann said.
The firm plans to add a senior associate sometime during the next twelve months, Dann said.