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North America: February 2003

Redpoint and Sevin Rosen cut fund sizes, LA ups private equity allocation, Canadian investment levels drop, US investment to fall by 50 per cent…

Siemens corporate venturing unit opens office in US
The corporate venturing unit of German technology giant Siemens has opened an office in San Jose, California to take advantage of US wireless opportunities. Dr Dietrich Ulmer, CEO of Siemens Mobile Acceleration, said the new US operation would complement the firm's existing activities in Europe and Asia. The unit will provide early-stage and seed capital for start-ups in the wireless arena as well as lending them the group's marketing expertise and access to its global research, sales and distribution networks.
AltAssets 28.2.03

Ex-CIT Group veterans form new private equity firm focusing on US mid-market
The founding partners of CIT Group's private equity unit have formed a new private equity firm with three other CIT professionals, named Laud Collier & Company. The two founding partners are Paul Laud and Colby Collier. The firm will initially manage a portfolio worth more than $200m of invested capital, which was built up when the team was at CIT Group. New investments will also be considered, in the manufacturing, distribution and service businesses. The three other members of Laud Collier's team are Kenneth J Waters Jr, Edward R Burns and Michael D Horgan, all of whom previously worked at CIT Group.
AltAssets 25.2.03

Sevin Rosen cuts fund by third
Sevin Rosen has joined the long line of large venture capital firms to reduce to reduce their latest fund. It has slashed its eighth fund from $875m to $600m. The firm is expected to stick to its original intention of investing in around 15 companies a year through the fund's investment period as the reduction reflects the fall in company valuations. Sevin Rosen held a final close on the fund in November 2000. Its previous fund closed at $480m.
PrivateEquityCentral 11.2.03

CalSTRS appoints Cambridge Associates as adviser for US alternative investment strategy
The California State Teachers' Retirement System, which has been seeking advisers for its alternative investment portfolio since September 2002, has appointed Cambridge Associates to the role. Cambridge Associates will recommend US opportunities to CalSTRS, perform due diligence and in general assist the CalSTRS staff on alternative investment. CalSTRS' alternative investment portfolio has generated a 17.5 per cent ‘compounded annual rate of return' since its inception in 1988, it said.
AltAssets 20.2.03

LA increases allocation to private equity
The $6.4bn Los Angeles City Employees' Retirement System has increased its target allocation to private equity from five per cent to seven per cent. This may not mean that the fund has new money to commit to investments, however. It currently has $252m or four per cent invested in private equity, but it also has $396m of uncalled commitments to real estate and private equity funds. This would take it close to its seven per cent target.
The Private Equity Analyst February 2003

US venture fundraising slumps more than 80 per cent in 2002
US venture capital fundraising remains in crisis as the amount raised in 2002 fell by 83 per cent on 2001 figures, according to new figures released by Thomson Venture Economics and the National Venture Capital Association. Just 108 US venture funds raised $6.9bn last year, compared to 331 venture funds in 2001, which raised $40.7bn. The fourth quarter was particularly barren for venture firms as 31 venture firms struggled to obtain$1.2bn. Further evidence of the continued decline of the venture capital industry in the US made itself felt in the number of funds reducing their fund size. Some 26 US venture capital firms announced the downsizing of their funds in 2002, with $5bn handed back to investors.
AltAssets 11.2.03

EDS sells off portfolio
Electronic Data Systems, a provider of corporate information systems, is to close its venture capital fund and put its portfolio up for sale. The fund, announced in 1999, was originally targeted at $1.5bn but ended up investing just $6m. EDS intended to invest in private companies for strategic reasons; it said would now focus on partnerships instead. The company is hoping to sell its interests by the end of the year.
VentureWire 24.2.03

Canadian private equity investment levels down 35 per cent year on year in 2002
The amount invested in Canadian companies by private equity firms slipped to Can $2.5bn in 2002, down 35 per cent from the Can $3.8bn invested in 2001. Although the annual figure made for disappointing reading, the most recent quarter showed some improvement. Investment activity in Q4 2002 was worth Can $754m, a jump of 51 per cent on Q3. Communications and networking attracted 27 per cent of all investment, with life sciences second, attracting 19 per cent. While the value of US private equity investment into Canada decreased by 40 per cent in 2002, its share of total capital invested remained relatively constant at 26 per cent.
AltAssets 27.2.03

New World ventures cuts fund size
Chicago-based venture capital firm New World Ventures is to cut its William Blair New World Ventures fund from $80m to $50m. The fund has so far invested around $40m of the capital and has retained $7.5m for follow-on financings. New World has also decided to cut its management fees by 70 per cent. The firm has $100m under management.
VentureWire 12.2.03

US venture-backed M&A value falls dramatically in 2002
Yet more bad news for US venture capitalists hoping for an upturn: the value of venture-backed mergers and acquisitions fell to $7.2bn for 300 transactions in 2002, compared to 336 transactions worth $17.1bn in 2001. Software remained the leading sector for venture-backed M&A in the fourth quarter of 2002, accounting for 43 per cent of deals and 40 per cent of the total quarter value. Telecommunications also made a relatively strong showing with seven deals valued at $172.9m, but there was a surge in healthcare M&A transactions, which accounted for 25 per cent of value for the quarter.
AltAssets 21.2.03

VC firms looking at new investments again
Nearly half of the venture capital firms in Silicon Valley are to start making new investments, according to a survey by Deloitte & Touche. This is up from 36 per cent last year and follows a couple of years in which most VCs have focused on making follow-on investments in existing companies. Around 38 per cent of respondents said that they would deploy between a quarter and a half of their uncommitted capital to new deals. There was further cause for optimism in responses about the general economy. While the majority - 65 per cent - said they thought the economic environment was unlikely to improve this quarter, 82 per cent said they believed that the value of the Nasdaq would increase by up to 25 per cent by the end of 2003.
The Deal 27.2.03

Debut mid-market fund for US joint venture Catalyst/Hall
US mezzanine funds The Catalyst Group, based in Houston, and Hall Brothers Holdings, of Oklahoma City, have joined forces to raise a new mid-market fund named Catalyst/Hall, with $150m. Catalyst/Hall's fund will target a range of industries, and will provide mezzanine debt in the range of $1m to $5m, with equity investments ranging from $2m to $7m. Investors into the new fund include high net worth families, institutions and principals of the partnership itself, the firm said in a statement. The firms said the joint venture would help them expand their geographic reach. Companies considered will be those based in the south-west and mid-west regions of the US.
AltAssets 18.2.03

Forward Ventures cuts fund target
San Diego-based Forward Ventures is to cut the size of its fundraising target following the death of one of its team last December. Managing member Jeffrey Sollender died in a car crash. The firm has said that it is seeking to raise $250m instead of its original target of $400m and explained that it didn't intend to hire a replacement for Sollender.
The Private Equity Analyst February 2003

Average number of US investments expected to increase by 50 per cent over the next year
US mid-market private equity firms are looking to increase their investment pace substantially over the next 12 months, according to new research carried out by US-based M&A research firm RW Baird. The average number of investments that mid-market focused firms expect to make in 2003 is more than 50 per cent higher than the average number of investments made in 2002. Mid-market firms have the capital available to keep such promises, should the opportunities present themselves, the survey found. The average mid-market firm has only invested 38 per cent of its current fund. But despite such a positive outlook for 2003, the economic uncertainties and global political instability were reflected in the finding that almost 25 per cent of the 190 responses indicated that return expectations had lowered substantially. Mid-market firms have traditionally expected returns of upwards of 30 per cent; they now anticipate returning between 20 per cent and 30 per cent.
AltAssets 11.2.03

Redpoint reduces fund size
Menlo Park-based Redpoint Ventures has become one of the latest firms to reduce the size of its fund. Following on from firms such as Mobius Capital and Mohr, Davidow Ventures, it has cut the size of its Redpoint Ventures II fund from $938m to $750m. This is the second time the fund has been cut: Redpoint originally raised $1.25bn for the 2000 fund. The firm said the reduction came as a result of falling company valuations. It had originally anticipated investing an average of $14m per company, whereas now $12m was more likely, it said. Redpoint specialises in early-stage technology investments.
The Private Equity Analyst February 2003