SV Life Sciences Sets Sights on Fourth Fund –

SV Life Sciences is looking to raise $400 million for its fourth venture capital fund. The Boston-based firm sent out books shortly before Labor Day, and anticipates a final close sometime in 2006, according to people familiar with the matter.

At first glance, the move may seem a bit hasty, considering that SV Life Sciences closed its third fund just over two years ago. In reality, however, that vehicle held an initial close in March 2002, and already has 27 portfolio companies. Among the most promising are aptamer drug developer Archemix Corp. and noninvasive liposuction company LipoSonix.

Cambridge, Mass.-based Archemix has raised about $96 million in several rounds from SV Life Sciences and other firms (such as Rho Ventures, Prospect Venture Partners and Atlas Venture, among others), according to The MoneyTree Survey from Pricewaterhouse-Coopers, Thomson Venture Economics (publisher of VCJ) and the National Venture Capital Association.

LipoSonix, of Bothell, Wash., has raised about $40 million from SV Life Sciences, and The Carlyle Group, Delphi Ventures, Three Arch Partners and Versant Ventures, among other investors, according to the MoneyTree.

As with its previous funds, SV International Life Sciences IV will back seed-stage, early stage and expansion-stage companies focused on biotech, medical devices, pharmaceuticals and health care IT and services. SV Life Sciences has satellite offices in London and San Francisco, with 25 investment professionals.

The typical investment for its funds is between $2 million and $20 million.

SV International Life Sciences III was capitalized with $402 million, while its predecessor came in at $310 million. In all, the firm currently manages four funds with about $900 million in assets.

The firm also advises an international life sciences investment trust listed on the London Stock Exchange.

SV Life Sciences was previously known as Schroder Ventures.

– Dan Primack

Mayfield Holds Final Close

Mayfield, a venture capital stalwart since 1969, closed its twelfth fund with $375 million, but lost at least seven brand-name limited partners due to a combination of low returns, and disagreements over the handling of a management fee and clawback situation.

Mayfield, a Menlo Park, Calif.-based firm, secured capital commitments from about 75% of its Fund XI investors.

Kevin Fong, a managing director with Mayfield, acknowledged that returns from the firm’s past two funds have been disappointing, and that returning to the fund-raising circuit was difficult. He would not discuss specifics of the fee/clawback issue, however, except to say that he was “saddened” that certain limited partners had aired their grievances to PE Week, a sister publication to VCJ (the story was re-published in the September 2005 issue of VCJ).

“We pride ourselves on having very good LP communications, and encourage LPs to tell us both the good and the bad on a one-to-one basis,” Fong says. “We were very forthcoming to our LPs, and we believe we responded appropriately, and only acted on amendments that were viewed and signed by our LPs.”

However, the firm was aware of dissention in the LP ranks prior to the news articles, particularly since the stories appeared only after some of the LPs had opted to pass on participating in fund XII. Moreover, not all LPs voted in favor of the amendments, while others signed only after basically realizing that their only other option was to sue.

“We viewed those communications as one-to-one, and are disappointed by the fact that some LPs have chosen to use an alternate public channel to vent their frustrations,” Fong says. “Clearly, we haven’t done our job in encouraging them to get to us directly.”

“Kevin is saddened’ that someone actually had the audacity to take it out of house,” asked an incredulous LP. “I guess then I am saddened that Mayfield took my money.”

Mayfield remains a fiduciary to all of its past investors, and has no plans to change that relationship.

As for fund XII, Fong says that Mayfield will continue its focus on consumer Internet, communications/mobility and enterprise software spaces. Average investments will range from $7 million to $9 million, with its first disbursements expected to come later this year. There still is some dry powder left in Fund XI-some of which went last month to a $19.5 million Series B round for Jobster Inc.

The fund was sold with a 2.5% annual management fee and a 30% carried interest structure, which is not inclusive of fees. Limited partners included HarbourVest Partners and J.P. Morgan Chase, according to a regulatory filing.

In related news, Mayfield promoted venture partner Raj Kapoor to managing director, and added a managing director title to CFO James Beck.

– Dan Primack

Largest China Fund Raised

Hong Kong-based SAIF Partners has raised $643 million, the largest fund ever raised by a domestic Chinese venture firm, VCJ has learned.

Andrew Tan, president and managing director of the firm, said that the fund closed on June 29. It will make growth and late stage investments in IT and media companies, with investments ranging from $10 million to $40 million each. Tan expects the fund to back between 25 to 30 portfolio companies. SAIF’s fund has already made seven investments, but Tan wouldn’t disclose their identities.

The firm, previously called Softbank Asia Infrastructure Capital, was managed by Softbank Asia and had one limited partner-San Jose, Calif.-based networking systems maker Cisco Systems. Today, SAIF is owned by the eight GPs in the fund and is independent of Softbank. And while Cisco remains the largest LP in the new fund, having contributed $250 million, SAIF II has added a number of top tier LPs, such as: Softbank, Princeton University, Rockefeller Foundation, The MacArthur Foundation, Carnegie Mellon University, Horsley Bridge, The Common Fund and JP Morgan among others.

Tan says the firm was able to raise so much money because of the quality of the firm’s team, most of whom have been at the firm since 2001.

Plus, the track record of the firm’s first fund helped in the latest fund-raising efforts.

“Several of our LPs have told us that our first fund was No. 1 in the world in annualized IRR for an 01 vintage fund and also No. 1 in terms of the capital it has returned, again, for an 01 vintage fund,” Tan says.

SBAIF I, which is fully committed, has, according to Tan, already returned $560 million from the $400 million invested in that fund. He adds that $80 million of the fund has yet to be drawn for existing commitments. Among the highlights in those returns was an investment in one of the most successful IPOs last year-Shanda Interactive (Nasdaq: SNDA). SAIF was the sole investor in Shanda’s $40 million round in 2003.

The Shanghai-based online gaming company raised $150 million in an IPO in May 2004. Tan says the firm, which owned 25% of Shanda, exited from its investment in January and returned “14X our original investment.”

As for raising its latest fund, Tan says that the firm spent the last six months visiting with LPs, telling them about Shanda and demonstrating the firm’s track record. The result, he says, is that the current fund was heavily oversubscribed.

Tan says that about two-thirds of the fund will be invested in China, Hong Kong and Taiwan. The remainder will be split between deals in Korea and India.

-Jerry Borrell

Sprout Turns Into New Leaf

The venture firm formerly known as the Sprout Group has re-emerged as New Leaf Venture Partners and announced in mid-August that it closed a new fund with $310 million.

Sprout began as an affiliate of Credit Suisse First Boston, which is a limited partner and general partner in the NLV Partners fund. Other LPs in the new fund include California State Teachers’ Retirement System and Emory University and returning Sprout LPs the Common Fund and the University of Michigan.

The new fund’s limited partners are roughly a 50-50 mix between new and returning LPs, says Managing Director Philippe Chambon. He says that the firm expects to have a newer mix of LPs due to the firm’s change in strategy.

“Sprout used to be a large and diversified venture fund and this is smaller and dedicated to health care,” Chambon says. “It does not necessarily appeal to the same range of limited partners.”

In addition to Chambon, NLV is made up of the former managers of the Sprout Group’s Healthcare Technology team. They are Managing Directors Andrew Firlik, Ron Hunt and James Niedel in New York and Managing Directors Jeani Delagardelle, Kathy LaPorte and Vijay Lahti and Vice President Hao Zhou in Menlo Park, Calif.

Chambon declined to elaborate on the new fund’s fee and carry structure, but he describes them as “standard.”

The new fund will focus in investing in clinical-stage biopharmaceuticals, early-stage medical devices and molecular diagnostic technologies over the next three to four years. So far, the new fund has made one investment.

NLV Partners announced in late August that it has co-led a $50 million round of initial financing in Cerexa Inc., a biopharmaceutical company focused on developing, acquiring and commercializing hospital-based anti-infective therapies for the treatment of patients with life-threatening infections. The firm invested $8 million in the financing, which was co-led with Frazier Healthcare Ventures.

Sprout IX became completely invested in new companies during the first half of 2005 and, according to Chambon, “dovetailed nicely” with starting investments from the new fund. The new fund will invest about $15 million in 20 companies. NLV Partners will continue to manage Sprout’s health care portfolio.

The move culminates a change started in late 2003 when the Sprout Group abandoned IT investing. It said it was spinning out its health care group to form Sprout Healthcare Ventures.

At the same time, the firm cut the size of Sprout IX by 25% from $1.44 billion to $1.08 billion and decreed that all future investments from Sprout IX would be health care investments.

– Matthew Sheahan

Another VC Targets Israel

A new venture firm called Jerusalem Capital is trying to raise $100 million for its inaugural fund, and expects to hold a $25 million first close this fall.

Principal Michael Brous, who previously was an analyst with Israel Seed Partners, says that the new firm plans to lead or co-lead deals for early stage, revenue-producing companies in Israel that focus on communications services, infrastructure services, business/professional services or media/entertainment services. He insists that Jerusalem Capital’s targeted IRR of 30%-plus is realistic.

“Because we’re focused on services, our portfolio companies will be ones that can grow at an extraordinary rate with little cash input,” he says. “It’s what you’ve seen with Yahoo or Google or eBay.” Brous acknowledges that his firm could have some competition for such deals-from Benchmark Capital Israel, for example, which this year raised its second Israel-focused fund with $250 million-but he says Jerusalem Capital has strong deal flow thanks to its team’s deep local networks.

Managing Partner Jacob Ner-David successfully built and exited such tech-enabled service companies as Delta Three (VoIP), Nomad IQ (wireless) and Ambient (broadband).

Jerusalem Capital’s other principal is Steven Zecher, former executive director of the Pennsylvania Economic Development Financing Authority, who relocated to Israel three years ago.

The firm also features two venture partners-David Brodet and Gary Liebler-and a seven-person advisory board consisting of: Scott Petrack, CEO of Alcatel’s eDial division; Tamar Ben-David, former director general of Israel’s Government Companies Authority; Richard Roberts, former managing director of Goldman Sachs; Peter Paz, partner with Nexus Global Partners; Avi Barak, president and CEO of Yissum, Hebrew University; Gideon Ben-Zvi, CEO of HumanEyes Technologies Ltd.; and Shlomi Fogel, CEO of Ampa Group Ltd.

The firm expects the fund to invest in about 20 portfolio companies, with an average total investment of $4.5 million per company. It plans to charge a management fee of 2.5% for the first five years and 1.5% for the next two years (only a seven-year term, from the final close), plus a 20% carried interest structure.

The firm’s founders are contributing $1 million.

– Dan Primack

Trinity Finds Strong Interest

Trinity Ventures has closed its ninth fund with $300 million in limited partner commitments. The Menlo Park, Calif.-based firm began fund-raising in March with a $250 million target capitalization. All commitments were due in Q2, with the final close occurring in August.

Larry Orr, a general partner with Trinity since 1989, says not to expect any changes in investment strategy. “We plan to keep making early stage, high-quality deals in the information technology and tech services sectors,” he explains.

The Fund IX general partnership has just two significant changes from when Trinity closed fund VIII. Tod Francis left in mid-2001 and co-founded Shasta Ventures after his e-commerce and consumer software focus fell out of favor, while Jaime Shennan has been essentially retired for several years. The firm also hired Paul Vabakos as a GP in mid-2001, but he left in late 2003 after Trinity cut the size of fund VIII. The current team includes Orr, Tom Cole, Noel Fenton, Tim McAdam, Kathy Murphy, Gus Tai and Fred Wang.

– Dan Primack

Draper Loves Eastern Europe

Tim Draper has fallen in love-with the Ukraine. The “Ukraine has the opportunity now to become a free market-driven economy and a solid growth engine for Europe,” says Draper.

“If President Victor Yushchenko gets the support he deserves, Ukraine could even become a freer market than America. Ukraine is known to be the technology center of the former Soviet Union. There will be a lot of new technologies to mine,” says Draper, of Menlo Park, Calif.-based Draper Fisher Jurvetson (DFJ).

Draper is putting his money where his mouth is. DFJ is currently working with Kiev-based TechInvest to raise $50 million to $80 million for a new fund called the DFJ-Nexus Fund that will provide funding for about 40 Ukrainian and Russian startups. Draper says that closing on the fund is “imminent.” In exchange for its affiliation with DFJ, TechInvest will pay DFJ management fees and supply the firm with deal flow.

Draper has also committed his own money to the fund, because, he says, “Ukraine will become an economic powerhouse, I know it, I see it and I smell it.”

The firms say in a press statement posted on the DFJ website that DFJ-Nexus is the first technology VC fund based in Ukraine. The fund will make investments in early stage Ukrainian and Russian tech companies targeting global markets. The DFJ-Nexus team expects to announce its first investments in early 2006.

While it may be Draper’s boldest-and most curious-initiative yet, the venture capitalist is far from alone in his interest in the general region. In fact, since 2002, 22 venture firms and private equity firms have made investments in Russia, according to Thomson Venture Economics (publisher of VCJ).

Also, the Emerging Markets Private Equity Association, a Washington, D.C.-based trade association that was formed earlier this year to improve the performance of private equity investing in emerging areas of the world, estimates that there are more than 1,000 private equity firms investing in emerging markets in Asia, Latin America, Africa, Europe and Russia, though there is no tech-focused fund like DFJ-Nexus that is based in the Ukraine.

Among those active in the Russian region is Intel Capital, which has been active in the country for two years and has been vocal about what it views as Russia’s great potential in computing and communications. Intel has publicly announced just two investments since then.

Also, earlier this year, Baring Vostok Capital Partners-an affiliate of London-based Baring Private Equity Partners-closed its third fund with $400 million in limited partner commitments. Moscow-based Baring Vostok invests primarily in mid-sized companies in Russia, Ukraine and other former Soviet Union countries.

And German-based Quadriga Capital earlier this year filed to raise $140 million for Quadriga Capital Russia Private Equity Fund II LP. At the time of its regulatory filing, the fund had raised $3 million from one accredited investor.

DFJ has, of course, lent its brand to far-flung investors numerous times before. The firm has co-founded Wasatch Ventures in Salt Lake City; Zone Ventures in Los Angeles; Timberline Ventures in Portland, Ore.; the Polaris Fund in Anchorage, Alaska; and Draper Fisher Jurvetson Gotham in New York City, among others.

The firm is also working with Toronto-based Primaxis Technology Ventures Inc. to fund deals in Canada.

– Constance Loizos