East Coast Capital Firm Is Planning More Southland Ventures
Expect East Coast venture capital firm Battery Ventures to be more active in Southern California after a recent investment in Fasturn, a Century City-based online marketplace for the apparel industry.
Although active in Silicon Valley through its San Mateo office, Battery, based in Wellesley, Mass., sees increasing opportunity here, despite recent stock market volatility that has made it difficult for many Internet firms to go public.
“We hope to be more aggressive about funding companies here” in the Southland, said Ravi Mohan, a principal with Battery in Northern California. “Things are really beginning to emerge in Southern California.”
The 17-year-old firm has raised nearly $2 billion from investors for its six funds to date. Battery, with its 11 general partners, brings various resources to fledgling companies, including management and public relations expertise.
And it brings big-time money through Battery VI, a $1-billion fund that closed May 31. The company has several high-profile investors, including Bell Atlantic Corp. (now Verizon Communications) and General Motors Corp. Battery also attracted European investors, including financier Lord Jacob Rothschild, head of the well-known British merchant family.
“Certainly one of the advantages of a $1-billion fund is that you can support your companies through periods [of market turmoil] like this,” said Ken Lawler, a general partner with Battery. Venture capitalists buy stakes in start-ups at various stages of development, hoping to cash in when the companies go public through initial stock offerings or are sold.
Battery’s $14-million investment in Fasturn is by far its largest here to date. The firm’s other Southern California investments include $1.5 million in San Diego-based HNC Software Inc. in 1986--for a stake that grew to $35 million after the company went public--and $3.2 million in Peerless Systems Corp., a maker of hardware and software for laser printers in El Segundo.
Battery partners said they will be looking for all types of investments in Southern California, especially communications equipment and services companies, software firms and Internet services providers.
It has high hopes for Fasturn, which runs a business-to-business online marketplace to link retailers, factories and buyers in the apparel industry worldwide.
“I think it’s going to be a large, independent public company one day,” Mohan said. “They could really change and enhance how business is done.”
Fasturn also likes the partnership.
“Battery has a great understanding of the B2B space, great judgment and is helpful with any problem I have,” said Frank Litvack, chief executive of Fasturn, which was started last year and launched its site on May 15 this year. Litvack, 44, was a cardiologist and investor in medical technology start-ups before he decided in 1998 that he wanted to form an Internet company.
Fasturn’s online community allows buyers to upload designs, specify order characteristics, search a worldwide factory database, create a purchase order and track works in progress up to and including delivery.
“We’re not just a ‘dot-com.’ We’re a business solutions company,” Litvack said.
Fasturn raised $10 million in a first venture round that closed in January, with financing solely from Battery Ventures. In late May, it raised $40 million in a second round that included $4 million from Battery. Other second-round investors included Lehman Bros. and Texas Pacific.
“Fasturn has been very helpful to us in our overseas business. We can use them to find products [and] various garments throughout the world,” said Stan Joffe, a customer of the fledgling Web site and a Van Nuys wholesaler of casual wear for adults and children, including T-shirts and sweatshirts that he sells to Miller’s Outpost and Urban Outfitters.
“We can get pricing and delivery faster,” he said. “We can buy things at better margins.”
For new investment ideas, Battery Ventures is also looking to Europe, having recently opened a London office.
The company has been boosted by successes such as an early investment in Cambridge, Mass.-based Akamai Technologies, whose stock is up fourfold from October’s offering price despite tumbling this year.
Battery has generated strong returns for its well-heeled investors, as many venture firms have in the IPO boom of recent years. Battery IV, for example, which was launched in January 1997, returned an annualized 250%.
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In other news, Idealab Capital Partners, the venture arm of Pasadena incubator Idealab, is expected to announce today that it has invested $16 million as part of a $20-million third funding round for Comet Systems, a New York-based software maker. The funding marks the first investment by ICP, which is expanding its East Coast presence, in a Manhattan-based start-up.
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Times wire services were used in compiling this report. Remember that initial public offerings are highly speculative and not suitable for all investors. Debora Vrana, who covers investment banking and the securities industry for The Times, can be reached at debora.vrana@latimes.com or Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012.
