ANDOVER, Mass. – @Ventures III, the latest venture fund affiliated with CMGI Inc., held a final close in December, landing $272 million.
While it is the company’s third VC effort, this is the first time outside investors were permitted to participate. Limited partners that ponied up at least the $2 million minimum included Microsoft Corp., Vulcan Ventures, KingWorld Productions, BancBoston Capital, LVMH Moet Hennessy Louis Vuitton, Sumitomo Corp., Onex Corp. and JAFCO American Ventures.
“We are proud that we have geographic and industry diversification among our L.P.s,” said Bill White, president of CMGI’s Internet group. “We might find ourselves doing business with these people on any number of levels.”
CMGI Inc. committed $54.4 million to Fund III, representing 19.9% of the total. Additionally, the parent company will be the only limited partner to have co-investment privileges in Fund III portfolio companies, Mr. White said. While marketing the fund, the company did not offer co-investment opportunities to outside L.P.s.
The investment mandate for the fund will remain the same as for Funds I and II, with a heavy focus on four Internet-related areas – electronic commerce, content, community and infrastructure. Prior to the final close, @Ventures III made investments in three early-stage companies – Raging Bull, Ancestry.com and Virtual Ink.
Mr. White said the increased size of @Ventures III will lead the firm to place larger equity stakes in portfolio companies, likely between $5 million and $10 million per deal. He noted, however, that the firm intends to continue its strategy of strong board representation and typically being the largest outside investor in its companies. Additionally, Mr. White cited increasing valuations as a major contributing factor for the larger fund size and average investment.
Separate from the fund closing, CMGI Inc. raised $50 million in a December private equity financing. Rose Glen Capital Management L.P. of Bala Cynwyd, Pa., was the lone investor in the offering, which was placed by Shoreline Pacific Institutional Finance, a division of Financial West Group.
Mr. White said proceeds from the offering will be used by the corporation for acquisitions of controlling interests in non-portfolio companies. CMGI Inc. does not invest in the portfolio companies of its venture funds. Rather, the company invests its own capital in unaffiliated, Internet-related entities, which are then folded into the Internet Group of companies to operate either as stand-alone operations or as a subsidiary of one of the seven existing companies.
“[CMGI] needs working capital to get a return on its operating companies,” Mr. White said.