Alcatel Is Setting Up L.A.-Based Tech Investment Fund

Aiming to step up its already torrid investment in promising U.S. technology, French communications equipment giant Alcatel today will unveil a new $150-million investment fund to be based in Los Angeles.

The new fund, Alcatel Venture Fund, will focus on providing early-stage financing to young communications firms. It will be run by Steve Kim, an Alcatel executive and former chief executive of Xylan.

Calabasas-based Xylan, which makes specialty switches and other data networking equipment, was purchased last year by Alcatel in a $2-billion deal. Alcatel has spent $7 billion to buy five small U.S. telecommunications firms since 1998, most of them based in California.

In September, Alcatel also announced plans to buy San Francisco-based Genesys Telecommunications Laboratories Inc., which makes software for customer service call centers, for $1.5 billion.

Now, Alcatel plans to use the venture fund to dig deeper into California’s technology hotbed.

“This is part of a comprehensive strategy to increase our position in North America,” said Patrick Liot, who was recently named president of Alcatel Internetworking Inc., the Calabasas division created to manage the phone company’s recent acquisitions. “We also want to be much more active in the innovative, advanced technologies, and the way to do that is very much through venture capital,” he said.

Alcatel will be the majority partner in the new fund, and the remaining partners will be announced next week, Liot said. The fund’s headquarters will be in Los Angeles, with an office in Menlo Park.

While the $150-million initial investment pool pales next to some venture funds recently announced by other firms in Los Angeles, it’s still enough to finance $5-million first-round investments in 30 companies.

“You can do a lot with $150 million, and it may just be the toe in the water for Alcatel,” said Rick Smith, managing director of Los Angeles-based SunAmerica Ventures.

“This shows that people well beyond California realize that Los Angeles is a very good place to be investing.”