ROWAYTON, Conn. – Canaan Partners has added Stephen Palfrey, of Sanford C. Bernstein & Co. Inc., as a principal in its Rowayton, Conn. office to source and evaluate information technology deals.
Palfrey’s experience in technology and the software industry is a perfect fit for Canaan, which focuses on backing information technology and health-care companies, said Harry Rein, the firm’s managing general partner. “We are a growing firm and we expect that we will continue to grow,” Rein added, noting that he expects Canaan to hit the fund-raising market sometime within the next 12 months for the firm’s third fund.
While at Sanford C. Bernstein, Palfrey worked for two years as a sell-side analyst covering enterprise software companies such as SAP AG, Oracle Corp. and PeopleSoft Inc. Prior to that, he spent five years as a consultant at McKinsey & Co. Palfrey also spent 10 years in the technology industry, eight of which were spent at the Sarnoff Corp., where he worked on research and development in optoelectronics and communications.
Canaan Partners is currently investing its $500 million Canaan Equity II fund, which closed in January. Rein said he expects the vehicle to back between 35 and 45 companies with an average deal size ranging between $5 million and $10 million. Canaan invests nation wide and its focus is stage-independent, with a bias towards early-stage companies, he noted. The firm’s sophomore effort will likely back about 80% information technology companies with the remaining 20% of its capital in health-care deals.
Palfrey said he expects nearly all of his investments to be Internet-related, which will include infrastructure plays and business-to-business e-commerce services. He said he decided to make the leap to venture capital because after spending time studying companies as an equity analyst he felt the urge to work closely with companies in order to help build them into successes.
“After 10 years working in technology, five years of consulting for technology companies and a few years of doing equity research, I feel I bring a lot to my new role because I understand technology, how the market operates and how to work with businesses,” he said.
The firm’s investment team now numbers 15 professionals, with nine partners. In March, Maha Ibrahim, formerly vice-president of e-business at Qwest Communications International Inc., joined the firm’s Menlo Park, Calif. office as a principal. –