Spark closes second venture fund on $360m(3)

The Boston, Massachusetts-based venture firm has closed its second fund on $360 million.

Boston, Massachusetts-based venture firm Spark Capital has closed its second fund on $360 million (€261 million). The new fund will continue the investment strategy of its $260 million predecessor, targeting investments at the crossroads of the media, entertainment and technology sectors.

“The tectonic plates of media and technology are mashing into each other in a way that’s creating a lot of disruption, and consequently a lot of opportunities,” said Spark general partner Dennis Miller.

The firm looks for portfolio companies that stand to benefit from the evolution of media and are likely to emerge as leaders in this new hybrid sector. Spark invests in pure hardware, pure content, and the spaces where hardware and content intersect, Miller said.

Its portfolio companies include Next New Networks, a company that creates micro television networks on the internet, SendMe, a provider of mobile entertainment, and Xoova, an online medical services marketplace.

Spark’s second fund is significantly larger than its predecessor, which closed on $260 million in October of 2005. Spark knew that its second fund “would have a three in front of it,” Miller said, but did not anticipate the level of investor enthusiasm it encountered. During the three month fundraising process, all of Spark I’s limited partners returned for Spark II, in addition to a small number of new investors. Ultimately the firm turned away capital to maintain an optimal deal flow, according to Miller.

“We didn’t want to grow more rapidly than we thought we could handle,” Miller said. “We ended up at a place where there was still significantly greater demand than we could meet.”

Still, the size of the new fund will allow Spark to write larger checks in the future. Miller said the firm has seen opportunities to invest in later stage companies than it has in the past.

Spark is still investing its debut fund, which Miller said is about 70 percent invested. After acquiring five or six more companies, Spark will begin investing the new fund, probably early next year. The firm expects to acquire 20 to 25 companies through Spark II.