Galileo Partners, the Paris-based private equity firm, has reduced the size of its third fund amid concerns from LPs about the scope for investment in the European market.
The fund, which makes investments across IT, software and communications, has been reduced by over a third (E92m) to E158m following the departure of one of the firm’s GPs and a reduction in deal activity, according to French business daily L’Agefi.
Fund III raised E250m for technology investments in France and Europe, making it one of the largest European funds dedicated to the sector. Last year the firm added the acquisition of secondary technology portfolios to its investment strategy.
However with only 24 per cent of the third fund invested two years after it closed on E250m, the firm decided to speak to its LPs, which include Goldman Sachs and HarbourVest, about the possibility of reducing the fund’s size. “We saw that many US funds were scaling back the size of their technology funds and we decided that it was best to do likewise,” said Joel Flichy, Galileo partner. “Unsurprisingly, all of our LPs were happy to co-operate.”
Galileo had previously been seen as one of the success stories of European technology investment, achieving an IRR of 60 per cent on its Galileo I fund. The firm has continued to invest in internet and software companies throughout the technology slump, believing that its investments should be able to ride out the downturn. “Deal flow could be better, but we are still seeing opportunities and are close to completing two new investments,” adds Flichy.
Galileo has also been affected by the departure of Bernard Maître, one of France’s eminent investors in the technology sector. Maître was the co-author of ‘The business models of the New Economy’, published in 1999, and is one of France’s most celebrated exponents of internet investment.
Galileo has also had to address difficulties in its second fund. In April, Galileo closed Galileo IIB, one of Europe’s first ‘side funds’, which will make follow-on investments in portfolio companies that were unable to achieve exits due to the shrinking of the technology sector. The firm raised E12m for the side-fund, with all of Fund II’s LPs committing capital.