Scheer Venture Fund Adds IT to Focus –

BRANFORD, Conn. – In response to an icy reception by investors to a health-care focused fund, Scheer & Co. has expanded its inaugural venture vehicle to include health care-related information technology deals.

Scheer Venture Partners was launched about a year ago with a $50 million target (VCJ, February, page 28), but by press time the vehicle had no commitments in writing, General Partner David Scheer said.

The revised fund, whose name and size will remain the same, is an outgrowth of Mr. Scheer’s consulting firm, Scheer & Co., which helps large pharmaceutical companies spin-out their technologies.

While the focus of the revamped early-stage vehicle will remain the same, the fund’s new IT component will target only those companies with a medical angle, Scheer & Co.’s area of expertise. Mr. Scheer predicts health-care IT deals will represent 30% of the venture fund’s investments, although an exact allocation has not been determined.

“We are not doing this because we feel that it is a window-dressing move,” Mr. Scheer said. “We believe that there are some very good opportunities in IT and Internet that we have the ability to exploit.”

Scheer Venture Partners has had a rough time fund raising, with investors more drawn to information technology and Internet-focused funds because of their lofty returns. “There’s a continued dichotomy in terms of … returns, which is really creating a problem for groups that are seeking to focus in health care,” Mr. Scheer observed.

Mr. Scheer had hoped to take advantage of Oak Investment Partners’ sponsorship of the fund as the venerable VC firm planned to outsource more of its health-care investing. But several months ago the firm announced intentions to cease biotechnology, medical device and health-care services investing.

Mr. Scheer has shifted his fund-raising efforts to more strategically interested backers who could benefit from access to an early-stage health-care fund’s portfolio companies. That would include, for example, pharmaceutical companies that would like to form relationships with portfolio companies, Mr. Scheer said.

Mr. Scheer also is exploring possible collaboration with European investors, providing a link for them to high-quality U.S.-based investment opportunities.

A target date for a first close on Scheer Venture Partners had not been set by early June.

For now, Mr. Scheer will concentrate on his busy consulting practice while he retools the fund and meets with potential limited partners.