Sevin Rosen Closes On $875M Fund VIII –

DALLAS – Although its investment strategy will remain the same – investing actively in early-stage technology plays – Sevin Rosen Management Co.’s newest vehicle, the $875 million Sevin Rosen Fund VIII LP, is bracing itself against the stormy winds of the IPO market. Sevin Rosen’s latest fund is almost $400 million larger than its predecessor and will take larger stakes in its portfolio companies to lengthen the runway between a start-up and a successful exit.

“The time between start-up and an IPO is longer,” said John Jaggers, an administrative partner with Dallas-based Sevin Rosen. “There’s contraction in the venture capital market, at least in terms of activity level.”

He added that public market hits to venture firm earnings will not only make it more difficult to find investment partners, but the capital required to build a market-ready company with recognizable revenue streams and a solid business plan will also continue to grow. That, he said, makes $875 million a very conservative amount for an early-stage vehicle.

The new fund will concentrate capital in three broadly-defined techno-centric markets: communications, the mobile Internet and Internet infrastructure. The vehicle will also allow the firm to get into early, capital-intensive communications infrastructure deals in the fiber optics arena, concentrating on optical systems.

“We wanted to have critical mass to support companies like that. They’re not cheap to get started. It’s something we want to have the capital to do,” Jaggers said.

Sevin Rosen will also be on the lookout for wireless plays, including Internet software and services and technologies that can scale the Internet to enable e-commerce. These include enterprise software, hardware solutions for server efficiency and application integration.

Jaggers said Fund VIII will invest as much as $20 million over the life of a company, slightly more than the $4 million to $15 million contributed by the firm’s previous funds. Moreover, while the last fund held 40 portfolio companies, the new offering will invest in 50 firms over a two- to three-year investment window.

To date, 40% of the firm’s investments are concentrated along the West Coast, from San Diego to Seattle, while another 40% sit in the central states, mostly in Austin, Texas, Dallas and Denver. The new fund will likely mirror that disbursement, but also will look to emerging international technology markets like Israel and Germany.

Currently, Sevin Rosen holds two portfolio companies in Israel.

With eight funds, Sevin Rosen has approximately $2 billion under management.