MENLO PARK, Calif. – Invencor Inc. is raising its first venture capital fund, the $70 million-targeted International Venture Fund I, said D. Kirk Westbrook, a managing director at the firm.
The fund, which launched last spring, held a first close on approximately $12 million in late-April, and may hold another interim close before the final close, expected in October, Westbrook said. International Venture Fund I is applying to become a Small Business Investment Company, meaning that the capital raised by the firm – an estimated $25 million to $35 million – will be leveraged two-to-one by the Small Business Administration, upon completion of the application process.
The fund will back seed and early-stage information technology and health-care services companies in Arizona, Hawaii, New Mexico and Utah, as well the Silicon Valley area, where the firm is based. The investors chose the Southwest market because “there is less competition from the investment side so valuations are much better in these areas,” Westbrook said.
International Venture Fund I will back about 13 to 15 companies, with investments starting at $500,000 and averaging $3 million to $5 million, over several rounds of financing. The firm plans to be the first institutional capital in the deals and plans to act as the lead investor in the majority of deals, but is open to co-investing whenever that fits best, Westbrook said.
At press time, the fund had made one investment in a Hawaii-based entity and had several deals in the pipeline, Westbrook said.
The fund’s limited partners consist of a mix of state funds, pension funds, foundations, banks and high-net-worth-individuals, most of which are based in the Southwest. As a first-time fund, the investors had difficulty convincing investors in Northern California to invest in a newly-formed fund investing in the Southwest, Westbrook said. A warmer reception was received from investors based in the desired areas of investment, as a venture firm with connections in Silicon Valley is seen as an asset in those undercapitalized markets, he said. The firm is taking a standard 2.5% management fee and an 80%/20% carried interest split.
Although a first-time fund, it is not the first time that Westbrook and his partner, Managing Director Debra Guerin are working together. Their tenure together began in 1995 at Silicon Valley Bank. They both left the bank’s National Division in 1997 to form Invencor, the fund manager for the Arizona Technology Venture Fund, a vehicle that incubates companies in Arizona. That vehicle is completely invested and no new investments are being considered.
The investors will consider hiring an associate, if the fund reaches its target, Westbrook said.