SANTA CLARA, Calif. – Silicon Valley Bancshares, the parent company of Silicon Valley Bank, held a $64.5 million first close in late June on its new fund-of-funds vehicle, SVB Strategic Investors Fund. The vehicle represents the first time Silicon Valley Bank (SVB) has raised a fund with outside investors, said Doug Hamilton, managing director of the fund. The vehicle, which was launched in early June, is aiming for a September 20 final close on $100 million to $125 million, he added.
Hamilton said the vehicle will be invested in 10 to 15 top-tier venture funds around the country, with an average investment of about $8 million to $10 million per fund. The vehicle will also make some co-investments as it receives opportunities, he added. To date, the fund currently has commitments to invest in Menlo Ventures, Redpoint Ventures, Sierra Ventures and Weiss, Peck & Greer Venture Partners LP.
Hamilton declined to identify what other firms the vehicle might invest in. He said the fund will likely invest in firms that have raised at least five or six funds and possess an established track record and a good reputation in the VC community. He said the vehicle was not looking to back firms investing in specific industry sectors, although he added the majority of the firms the fund invests in will likely have a focus on information technology.
Hamilton said the decision to raise a fund with outside LPs was a natural extension of the ad hoc investing that SVB has been doing for some time, as well as a way to keep up with growing minimum investment requirements at many VC firms. SVB is putting up 10% of the vehicle’s capital, he added. He declined to reveal the fund’s management fee or carried interest structure.
The bank is targeting chief executive officers and chief financial officers at its portfolio companies as potential investors in the fund, he noted. “This is one good way to thank those who have supported us so far,” he said. The fund also has a number of foreign institutions as LPs that Hamilton declined to identify. “This furthers the strategic relationship the bank already has with these investors,” he added.
Hamilton anticipated a six- to nine-month investment cycle for this fund. He said the bank will likely launch fund raising for a second fund-of-funds vehicle in December or January. He declined to say how large that fund will be. SVB hopes to expand its LP base with its second vehicle, to include institutional investors who can be long-term partners in a series of SVB vehicles, he added. The current fund’s base of individual investors probably does not have the capital to invest in a new fund year after year, he said.