Getting a new fund launched is easier in today’s climate than in recent years, but it’s still no walk in the park, say the founders of Shasta Ventures, which closed its inaugural fund with $210 million in commitments.
The three founders – who each sport a distinguished pedigree – say the process of signing up limited partners, which began in June, was “extensive,” in the words of Managing Partner Ravi Mohan, who was formerly a general partner at Battery Ventures. Shasta’s other co-founders are Rob Coneybeer, formerly a GP at New Enterprise Associates, and Tod Francis, who had been a GP at Trinity Ventures.
“Our track records and strategy resonated,” says Mohan, “but the question was how comfortable [limited partners] were with a first-time fund.”
Adds Francis, “Many limiteds have a lot less capacity to evaluate and pursue a first-time fund right now because of the sundry requests they are receiving across the private equity industry.
Shasta’s partners declined to name any of their LPs. But they say that they received commitments from the usual suspects: endowments, foundations, family offices and pension groups.
The connections helped. About half of the LPs had previously invested with Battery, NEA and Trinity.
A regulatory filing by Shasta shows that its two largest LPs are the California State Teachers’ Retirement System and the Teachers’ Retirement System of the State of Illinois. Both are listed as “beneficial owners” of the fund, which means that each put up at least 10% of the total, or at least $20 million apiece.
The filing lists 29 accredited investors. The largest number (nine) are based in California and together put up $61 million, followed by five investors in Illinois who put up nearly $48 million and two in Connecticut who put up $35 million. A lone Massachusetts LP put up $10 million, one New York LP put up $3 million, a single Ohio LP put up $2 million and a solitary Virginia LP put up $2 million.
Asked if Shasta had to make its fees or carry more “competitive” than industry norms to attract LPs, Francis replied: “We’re comfortable where we ended up regarding all of the terms.”
The idea for Shasta came together in the spring of 2003 after Coneybeer and Francis found themselves out of sync with their previous firms. NEA was, in part, moving toward later-stage investment strategies, while Coneybeer’s focus was on early stage investing.
Over at Trinity, Francis “wanted to embrace consumer technologies,” but the firm was “focusing increasingly on core technology within the enterprise,” he says. (Before joining Trinity, Francis spent 10 years at Johnson & Johnson Development Corp.)
Mohan joined the duo after he was downsized from Battery’s general partnership at the end of 2003, when the firm cut its sixth fund from $1 billion to $850 million.
The partners named their new firm Shasta after California’s Mt. Shasta. “It conveys longevity and stability, plus we liked that it stands alone and isn’t part of a [mountain] range,” says Mohan.
The firm is focusing on infrastructure, software and service companies. “We think there will be a balance” between those sectors,” Francis says, “and we also think [increasingly tech savvy] consumers are going to affect all three areas.”
Shasta has already made two investments, including a recent deal with a Utah-based company that sells graphic design services online to small and mid-size businesses. Because the startup is changing its name and launching a campaign around its new brand when that happens, Mohan asked that it not be identified. He also declined to reveal the amount of funding for the deal, which Shasta did alongside Benchmark Capital.
Before that, in early February, Shasta participated in an $11 million Series B for Zenprise Inc., a Fremont, Calif.-based startup that makes service management tools for IT administrators, according to The MoneyTree Survey from PricewaterhouseCoopers, Thomson Venture Economics (publisher of VCJ) and the National Venture Capital Association.
Shasta did the Zenprise deal with previous investors Bay Partners and Mayfield, and Mohan took a seat on the company’s board. Bay and Mayfield made an initial investment of $6 million at a post-money valuation of $11.67 million, in January 2004, according to the MoneyTree survey.
The partners have three to four years to prove themselves and it sounds like they won’t be taking that time for granted.
Locations: Menlo Park, Calif.
Fund Name: Shasta Ventures
Fund Size: $210 million
GPs: Co-founders and managing directors Ravi Mohan (formerly a GP at Battery Ventures); Rob Coneybeer (formerly a GP at NEA); and Tod Francis (former a GP at Trinity Ventures). Since the fund was announced, Shasta has hired Austin Grose as CFO.
Focus: The firm plans to invest in infrastructure (led by Coneybeer), software (Mohan) and services (Francis). Shasta will focus on early stage companies, primarily in the Western United States. Early stage investment amounts will range from $250,000 to $6 million. The firm expects follow-on rounds to result in a total investment amount per company of up to $15 million.
Source: PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree Survey and original research.