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May 3, 2001
Foundation Capital Closes $595M Technology Venture Fund
NEW YORK - (Dow Jones) - Foundation Capital, a Silicon Valley venture capital firm, has raised a new $595 million fund that will invest in technology startups.
The Foundation Capital IV fund, the firm's fourth, plans to invest between $1 million and $5 million in early-stage companies in various tech sectors, including business software and telecommunications, general partner Paul Koontz said in an interview.
The latest fund is Foundation's largest; its three previous funds ranged in size from $75 million to $275 million, Koontz said. The average VC fund size is about $191 million, according to the National Venture Capital Association. The fourth Foundation fund will probably begin making investments in the second half of the year, Koontz said.
Foundation's previous investments include Commerce One Inc. (CMRC); the business-to-business software maker, Interwoven Inc. (IWOV), which makes Internet content management software; and Rapid City, a telecom equipment maker acquired in 1997 by Bay Networks, which was later acquired by Nortel Networks Corp. (NT).
In raising the latest fund, Foundation tapped its existing investment partners, including pension funds and insurance firms. But Foundation also made a special effort to bring more university endowments on board. The result was that the endowments of the University of Texas, Harvard University and Yale University chipped in as new investors, Koontz said.
Foundation's pursuit of university endowments follows a recent trend among VC firms. Firms are increasingly turning to endowments and foundations for contributions because pension funds - which have traditionally contributed about 50% of VC fundraising, the NVCA says - might not be as reliable a source in the future.
That's because more and more pension funds are becoming "defined contribution" funds, in which employees, not fund managers, make investment decisions. Employees usually aren't able to choose VC funds as investment options.
Even with a hefty new $595 million fund, Foundation plans to continue to invest at a conservative pace, Koontz said. The firm made only 13 investments last year, and has invested in four new companies so far this year.
"People aren't investing in a rising tide this year," Koontz said. "There's a much rigorous level of due diligence to be done."
Indeed, the NVCA reported this week that VC investments in the first quarter plunged 43% from the fourth quarter, marking the second consecutive quarterly decline since hitting record levels last year.
- By Peter Loftus, Dow Jones Newswires |
