Encore Ventures, the secondaries-focused arm of DFJ Esprit, will continue its strong connection with 3i’s venture team by hiring three of the listed private equity firm’s partners.
DFJ Esprit chief executive Simon Cook, a 3i alumnus himself, declined to disclose the names of the partners slated to move to the budding division, saying some have yet to finalise leaving arrangements.
Market sources have identified the three as Krishna Visvanathan, who has focused on IT deals at 3i for nine years; Nigel Pitchford, who joined 3i in 1997 and is head of venture healthcare investing; and Jean-David Chamboredon, who joined 3i in 2004 as co-head of the technology business team in Paris. Pitchford and Visvanathan are still listed on 3i's website, but are expected to move to Encore in coming weeks. 3i declined to comment.
Encore yesterday agreed to assume management of a large portfolio of 3i’s European venture portfolio, with financial backing from Coller Capital and HarbourVest Partners.
DFJ Esprit started to think about building a venture-focused direct secondaries arm “the day Lehman Brothers collapsed”, Cook told PEO.
“It seemed after Lehman Brothers that many assets were going to come up for sale,” he said. “And we had some investors saying to us, ‘You guys seem to be very good at secondary venture, why don’t you do more of that?’”
What we’ve done is become the first branded venture capital model in the world to say the secondary model is a legitimate one … we believe that is the direction the venture market is going to go.
DFJ Esprit in 2008 worked with Coller Capital on a £24 million deal to take private the Prelude Trust, a portfolio of 15 companies DFJ Espirit inherited in its 2006 merger with UK technology investor Prelude. And in 2006, the firm assumed management of the Cazenove New Europe Access Fund, acquiring stakes in 35 companies, via a £67 million transaction financed by firms including HarbourVest, Wilshire Associates and LGT Group.
Given that DFJ Esprit’s six partners are focused on raising the firm’s third, primary venture fund, which recently held a €70 million first close, Cook said the only way to benefit from opportunities in the secondaries market was to build a new team.
In October 2008, the firm hired Charles Cameron and Brian Robertson to lead Encore. Cameron had previously been a director of Kleinwort Benson, Goldman Sachs and Jefferies International, while Robertson was a managing director of Lehman Brothers until 2004, and previously at Kleinwort Benson.
Going forward, Encore plans to acquire portfolios of assets on a deal-by-deal basis with financial backing from other investors. “We think the secondary market has lots of capital looking for deals and we have some very strong relationships” with many of those providers of capital, Cook said.
Cook believes Encore’s affiliation with a primary venture team associated with a Silicon Valley heavyweight will set it apart from other venture-focused, direct secondaries firms, such as Shackleton Ventures, Millennium Technology Ventures and Saints Capital.
“The other sort of ‘secondary-only’ firms don’t really have the depth and capabilities of a top-five, Silicon Valley-branded VC, and we think that appeals to the entrepreneurs, it appeals to co-investors, it appeals to buyers of companies,” he said.
“Effectively,” he continued, “what we’ve done is become the first branded venture capital model in the world to say the secondary model is a legitimate one. We haven’t seen a Sequoia secondaries or Index secondaries [team] yet, but we believe that is the direction the venture market is going to go.”
He added, however, that DFJ Esprit continues to believe “quite strongly” in the primary model. Its latest fund is targeting a €150 million final close.