W.R. Hambrecht isn’t just for auctions

A new partnership between Bill Hambrecht and Geneva Venture Partners’ Igor Sill won’t rely on Hambrecht’s revolutionary OpenIPO process for exits, but rather on the teams’ combined experience. Dave Keating reports.

Bill Hambrecht, one of the best-known figures in venture capital, has been a pioneer in the art of the IPO. He reinvented the business of taking companies public 30 years ago when he co-founded Hambrecht & Quist in San Francisco. Decades later, Hambrecht did it again when he left the firm in 1998 to found W.R.Hambrecht & Co., whose signature OpenIPO program utilises the Internet to allocate IPO shares through a Dutch auction process, in which no investor gets preferential treatment.

The online auction has dramatically changed the financial services landscape by bypassing the usual Wall Street channels and forcing all investors, large and small, to use the same system, making sure everyone pays the same price. Since its launch, 17 companies have used OpenIPO for initial public offerings, including those of Internet search engine Google, on-line fund and stock researcher Morningstar and on-line outlet shopping venue Overstock.com. And while the Dutch auction phenomenon has garnered the greatest amount of attention for W.R. Hambrecht, the firm has been making a small number of venture capital investments as well.

Since 1998, the firm has invested over $100 million (€80 million) in 63 emerging technology companies, primarily through private equity vehicles – which included individual investors – as well as through three technology funds. This week Hambrecht announced it has joined forces with Geneva Venture Partners, led by Igor Sill, to create a $50 million venture fund that will focus on early-stage technology companies, primarily in software. The fund, Hembrecht Geneva Ventures Fund, will be co-managed by Hambrecht and Sill.

Igor Sill says the new fund will not make OpenIPO a central exit tool

The size of the fund and its focus on startups is an indication of where the two see the greatest potential for returns. But though you might expect the OpenIPO process to be a central part of the venture, the partners say they are banking on their shared experience rather than the new auction system.

“Bottom line is Bill and I see the world through the same eyes,” said Sill. “[In] an early stage small fund, if you minimise the risk, and I believe we’ve mastered that, you have the highest return for investors.”

Sill and Hambrecht have been co-investing for 20 years, much of it through Sill’s work recruiting top software executives for Hambrecht’s portfolio companies.

Sill’s experience doesn’t just involve executive recruitment. He has spent his 25-year career managing firms and recruiting top software executives. He has also managed two earlier funds, Geneva Venture Partners Funds I and II.

Sill said he sees the combination of his ability to assess management talent and Hambrecht’s network of industry contacts as an ideal marriage.

“Bill is kind of the father of venture capital, so we’ll know we can get into a lot of the financial services companies in New York City,” he said.

Sill added that the OpenIPO component will also act as a strong lure for both investors and companies, although the two have decided not to make the service a central part of their plan.

“We had a lot of discussions on that issue,” Sill said. “But we didn’t want to make that a component of the fund. The bottom line is that OpenIPO levels the playing field for everyone, it’s the right thing to do. But at the end of the day, we’re going to focus on maximizing the yield of return to our limited partners. That may not always be through a public offering.”