BOSTON/PALO ALTO, Calif. – Spectrum Equity Partners in January held a $650 million second and final close on Spectrum Equity Investors III L.P., and the firm was slated to launch a side fund for entrepreneurs in February.
The side fund will not exceed more than $19.5 million, or 3% of the larger vehicle, a limit that was set by the main fund’s limited partners, explained Spectrum General Partner and Chief Financial Officer Randy Henderson. Spectrum launched its latest vehicle in October and held a first close in December on $534 million.
The venture group backs telecommunications, information technology and media/entertainment companies. About three-quarters of Spectrum’s capital is invested in late-stage deals, and the remainder is devoted to early-stage opportunities. Although the firm concentrates on United States companies, Spectrum can invest as much as 15% of its new fund in foreign concerns, Mr. Henderson said.
Spectrum’s 1994 Fund I totaled $108.6 million and is fully invested. So far, Fund I has returned $68 million. The sophomore vehicle, which has one or two deals yet to be made, wrapped in early 1997 on $252.5 million, Mr. Henderson said.
The fund features a 2% management fee and an 80%/20% carried interest split. Spectrum General Partners managing Fund III are: Brion Applegate, William Collatos, Kevin Maroni and Mr. Henderson. Partners Robert Nicholson, Matthew Mochary and Michael Kennealy, who were promoted from the associate level, will also oversee the new fund. Victor Parker joined the firm late last year as vice president.
Mr. Henderson declined to name limited partners, but said about half the capital in the latest fund came from Spectrum’s previous backers.
The Washington State Investment Board invested in Spectrum, following a recommendation from the pension’s adviser, Sovereign Financial Services Inc.
Sovereign Managing Principal Mary Kelley praised Spectrum’s deal flow and the way it makes media investments.
Washington has invested in both of Spectrum’s prior funds. Toronto Dominion Investments, Inc. also has been a limited partner in all three funds.