New Venture Funds Make a Menu for Entrepreneurs
Venture capital is increasingly available in Southern California--good news for entrepreneurs, all in all.
Some of the new venture capital comes from funds with deep roots in Southern California, some from recently established funds such as those detailed in this space last week. Whatever their vintage, the funds make it easier for entrepreneurs to raise venture capital than it was as recently as five years ago.
In addition to the four newcomer funds described in this space last week, these others have set up shop in Southern California in recent years:
* The Tech Coast Superfund (https://www.techcoastfunds.com), a $400-million “fund of funds” organized to invest in other venture capital and private equity funds targeting Southern California.
* SunAmerica Ventures, which has $500 million to invest in Southern California and elsewhere.
* Kline Hawkes & Co. (https://www.klinehawkes.com), with $112 million, most of it targeting companies in Southern California.
* Zone Ventures (https://www.zonevc.com), with about $115 million.
* East/West Capital Associates (https://www.ewcapital.com), with $250 million.
* Rolling Oaks Enterprises (https://www.rollingoaks.net), with about $30 million available.
Organized last fall in Orange County, the Tech Coast Superfund expects to invest in businesses indirectly through other, tightly focused venture capital and private equity funds, among them three of its own making:
* Tech Coast Capital, a venture capital fund targeting high-growth companies from early in their development through later-stage expansion.
* Tech Coast/University Partners, which focuses on companies seeking commercial use for technologies developed in universities.
* Tech Coast Innovation Lab, a seed fund operating in tandem with a start-up incubator.
Like other venture capitalists seeking opportunity in Southern California, the backers of the Tech Coast Superfund see a huge potential in telecommunications, the life sciences, e-commerce, information systems, and manufacturing.
SunAmerica Ventures, launched in 1997, is both a “fund of funds” and a direct investor--mostly the former. A unit of the big life insurer, SunAmerica Ventures has $120 million already at work through other venture capital funds, with another $150 million committed to the same pipeline; it has invested $80 million directly. About 40% of the companies in the SunAmerica Ventures portfolio are based in Southern California.
Founded in 1994, Kline Hawkes & Co. did its first deal in 1996. Unlike the other funds on this list, Kline Hawkes is a small-business investment company--that is, a private firm licensed by the U.S. Small Business Administration to provide debt and equity financing for small businesses. It has invested more than $60 million in Southern California so far and is pooling another $300 million in a second fund due to close next month, about two-thirds of which is likely to end up financing companies in Southern California.
Zone Ventures, organized in August 1998, is an offshoot of the Silicon Valley venture capital firm Draper Fisher Jurvetson. Zone Ventures started out with $35 million targeting e-commerce, Internet and software companies in Southern California exclusively. The fund’s backers expect to close a second, similar $80-million fund in the coming weeks, 90% of it likely to end up in Southern California firms.
East/West Capital Associates, founded in 1996, is a $250-million “evergreen” fund; as its investments mature, the fund rolls its capital over into new ventures. So far East/West has invested $100 million in 38 companies, among them 10 in Southern California. This year the firm expects to put another $30 million to $40 million to work in as many as 10 companies here and elsewhere.
Brian Sullivan, who holds an MBA from the USC entrepreneur program, founded the smallest of these new venture capital firms, Rolling Oaks, in February 1998. The firm pooled $15 million in its first fund, of which it committed 90% to 22 companies in Southern California. Sullivan expects to close another fund of $15 million by the end of March, most of it targeting information technology firms in Southern California.
Rolling Oaks backs companies ranging from new-economy Internet media ventures to old-economy industrial companies. In the Rolling Oaks portfolio are, for example, Firstuse.com Inc., an Internet “fingerprinting” service headquartered in Westlake Village for registering intellectual property, and Martin Container Inc., of Wilmington, a long-established cargo and container storage company.
Next Week: What Southern California’s older venture capital firms are up to.
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Juan Hovey can be reached at (805) 492-7909 or at jhovey@gte.net.
