When Herzliya and Palo Alto based early stage technology investor Gemini Israel Funds launched its fourth seed and early stage technology investment fund earlier this year, the firm's partners were planning for the long term.
Securing capital for the next investment cycle was obviously critical. But, according to managing partner Yossi Sela, Gemini was equally determined to expand its existing investor base so as to build a platform of which future fundraisers could be launched. This meant bringing a greater number of limited partners into Fund IV than into previous Gemini vehicles, preferably from a mix of geographies.
Six months on, the firm's mission was accomplished. In late August, Gemini IV closed on $200 million, taking assets under management to over $500 million. Commitments came from 20 institutions, over a third of whom are located in Europe. Fund III, by comparison, had raised just 15 percent of its funding from Europeans, with 75 percent coming from the US and the rest from Israeli sources.
In the new vehicle, Invesco and the London arm of venture capital fund of funds Horsley Bridge were return investors. Amsterdam-based Wilshire Associates and an unnamed Swiss fund of funds invested for the first time. “The fact that more European investors are now open to open into a fund like ours is evidence that they recognise Israel's status as a formidable player in venture capital,” said Sela in an interview.
These and other blue chip investors clearly came to share Gemini's view, outlined by Sela's colleague Jonathan Saacks, that “the state of Israeli innovation and technology is as good as it has ever been. The quality of the deal flow we're seeing now is a reason to be optimistic.”
Both executives agreed that the fundraising had not taken quite as long as expected, even though the thoroughness of investors' due diligence on the fund was unprecedented.
Part of what mattered to LPs was fund size. Sela would not be drawn on how much excess demand the fund had generated, but admitted that more money could have been raised. “We have a clearly defined seed and early stage strategy, and we strongly failed $200m was the right size. Fund size clearly is an issue with investors too: in today's environment, you won't get away with too large fund, even if you try.”
LPS KEEP FAITH IN BENCHMARK EUROPE
The European arm of international venture capitalist Benchmark Capital has capped its second European fund at $375 million (€306 million). Benchmark Europe II is the successor to the firm's first European fund, which closed in May 2000 on $500 million and is yet to achieve its first realisation. The new vehicle will not have a specific sector focus, but intends to follow a similar investment strategy to the first fund and invest in ecommerce, application and enterprise software, semiconductors and mobile computing among other areas. In January, the firm's European office was strengthened by the arrival of Swedish entrepreneur Johan Brenner, former founder and chairman of TIME Vision. That appointment brought the number of partners in the London office to five. Founded in 1995, Benchmark manages more than $2 billion in committed capital and has offices in Menlo Park, California, London and Tel Aviv.
DANSKE'S PEP II REACHES €550M
The Copenhagen-based private equity fund of funds manager has increased the size of its second fund to €550m following a €527m close in October 2003. Danske PEP II now has the same level of commitments as the organisation's first fund, Danske PEP I, but is still €50 million short of an original €600 million target. Danske Private Equity's parent company Danske Bank and Danske Bank Life Insurance committed €50 million each to PEP II. Chicago-based law firm Kirkland & Ellis advised on the fundraising. Danske PEP II has already invested in Leonard Green Partners' $1.85 billion buyout fund; Italian firm B&S Private Equity's €550 million IPEF IV; MPM Bioventures III, a $900 million life science fund; and Nordic Capital V, the €1.5 billion pan-Nordic buyout fund; Odyssey Venture Partners, a US venture firm; Investitori Associati, the Italian mid-market buyout investor; LCF Rothschild, a French venture investor; and Exponent Private Equity, the UK mid-market start-up.
SMALL CAP INVESTOR AIMS TO RAISE £200M
Stephen Edwards, Walid Fakhry, Angad Paul and David Dancaster are the front men of Core Growth Capital, a newly established equity house looking to invest in small to midsize private companies in the UK. Paul and Dancaster are chief executive and finance director, respectively, of Caparo Plc, a ([A-z]+)-based publicly listed industrial group that has agreed to sponsor Core Growth and the funds it aims to raise. The firm plans to raise capital primarily from high net worth individuals and wealthy families. According to Edwards, it intends to organise “a stable of funds over the next two to three years”, hoping to attract £200 million (€295 million; $355 million) in commitments. Core Growth intends to invest in privately owned businesses in the UK valued at £5 to £25 million. “It is very difficult, if not impossible, to raise institutional capital for this kind of strategy, especially in the UK,” commented Edwards in an interview. “Hence we see a big gap in the UK market that we can move into.” Caparo was set up in 1968 and specialises mainly in the manufacture and supply of steel and engineering products. In 2003, the group turned over £320 million, according to a press statement. Core Grow this advised by European law firm SJ Berwin.
SVG REAPS £70M IN DISTRIBUTIONS
On the back of improved market conditions allowing European private equity firms to step up their exit activity, London-based fund of funds manager SVG Capital has reported a strong improvement in distributions received from underlying partnership investments. During the first six months of 2004, the listed specialist asset manager received a total of £69.4 million (€101.8 million; $124.6 million) in distributions, compared to less than £4 million in the same period the previous year and £30.2 million for the whole of 2003. These distributions, the firm said in a statement detailing its un-audited interim results, were at an average 63 percent increase on December 2003 valuations. SVG is the largest investor in funds advised by European buyout house Permira. It is also a key LP in Schroder Ventures Life Sciences. The firm is currently marketing SVG Diamond, an innovative collateralised fund obligation backed by investments in private equity funds. The €400 million deal is expected to close this autumn.
€11M FIRST CLOSING FOR BARCELONA VC
Active Capital Partners, a ([A-z]+)-based venture capital start-up, is more than halfway to its fundraising target of €20m. The firm has raised €11 million ($13.5 million) for its debut fund, Molins Capital Inversion. The fund, which was launched in December 2003, has a target size of €€20 million. The fund is backed by a Catalan family, which is the anchor investor, as well as Madrid-based high net worth investors and family offices. ACP will look to acquire stakes of between five percent and 49 percent, investing up to €1 million per investment round. It would normally take the role of lead investor, but “often favours” syndication with other venture capital firms. The group was founded in 2002 by four entrepreneurs and founding partners: Joaquin Molins Gil, Christopher Pommerening, Philipp Schroeder, and Ricard Soderberg.
SVG RAISES €400M CFO FUND
SVG Advisers, the fund advisory arm of London-listed private equity fund of funds SVG Capital, has raised €400 million ($492 million) for a collateralised fund obligation (CFO) fund known as SVG Diamond.
SVG Diamond will initially purchase a secondary portfolio of interests in approximately 20 private equity funds and will make commitments to around 40 primary private equity funds diversified by vintage year, manager and geography.
The fund will be predominantly focused on buyouts in Western Europe and the US and will have an over-commitment facility of 133 percent, allowing a target investment capacity of €533 million and a re-investment period of seven years. Nomura acted as arranger of the fund.