SANTA MONICA, Calif. – Venturelab Partners LLC launched fund-raising efforts in mid-September for its $50 million-targeted vehicle, Venturelab Delta, said David Beneake, managing partner. The fund will be capped at $100 million, Beneake noted. Venturelab is hoping to hold an initial close on $50 million by the end of this year, with a second close on an additional $50 million by the end of the first quarter of 2001, he added.
The vehicle will primarily back early-stage Internet telephony and telecommunications companies, Beneake said. “We won’t do business-to-consumer or business-to-business plays,” he said, explaining “we are going to focus on companies formed around a key intellectual property.” Venturelab is particularly interested in the investment opportunities surrounding Session Initiation Protocol (SIP). SIP is a technology that Beneake said is the most likely protocol for voice and data convergence on the Web. Approximately 70% of the fund’s capital will go toward Internet-related deals, with the remaining 30% going toward other innovative technology companies, he said.
Beneake anticipated the fund would back between 10 to 15 companies with an initial investment of approximately $2.5 million. Follow-on investing should push the average deal size to approximately $7.5 million, Beneake added, noting he anticipated a two-year investment cycle for the fund. The vehicle has a 2.5% management fee and a 70%/30% carried interest split. Venturelab is not investing any money in the fund, he said. Instead, Venturelab is fronting the fund’s expenses, he added.
Venturelab is using MacArthur Strategies Inc., a NASD broker-dealer, as a placement agent to market the fund. Paul Nicholson, a managing partner in Venturelab Partners, is also the managing principal in MacArthur Strategies. Beneake said in addition to its fund-raising responsibilities, MacArthur Strategies will help source deals, as well as play an administrative roll in the fund’s management.
Beneake declined to identify who MacArthur was targeting as potential LPs, beyond saying the placement agent would target European investors and what he termed passive investors like pension funds, as well. “This is a level of investor a notch below investment bankers,” he said, adding “we don’t need hardcore investment bankers or typical venture capital partners in this fund.” Beneake said fund raising was off to a promising start. He declined to say how much capital the fund had raised to date.
The fund had not completed any deals to date. Beneake said the fund was pursuing two potential investments. The firm’s previous fund, Venturelab Beta, was a $4 million vehicle raised at the beginning of this summer for the purpose of doing one deal, he said. That fund purchased an interest in Intellectual Technologies Group LLC, a licenser of technologies for universities, he said.