DFJ Esprit sees disposals of venture capital assets

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The head of the British technology investor DFJ Esprit believes that the cloud hanging over the venture capital industry has a silver lining.

After striking a £ 130million deal to buy the bulk of 3i’s venture capital portfolio at a very bargain price, Simon Cook said the financial crisis was likely to force other assets to be put up for sale. venture capital.

“There are a lot of people trying to sell their venture capital portfolios,” Cook told the Financial Times.

“There are a number of venture capital funds coming to the end of their life, with managers who can’t raise a new fund and investors who want to exit. “

The financial crisis hit investors’ portfolios, causing money to dry up for new venture capital funds. Market turmoil has also closed the door to initial public offerings, which have historically generated a large chunk of industry returns.

After the dot-com bubble burst, many venture capital groups raised ancillary funds to support subsequent rounds of funding in the companies they had supported.

But this time, Cook says, the more mature secondary market, where second-hand holdings are bought and sold, could offer investors an alternative to investing more money in distressed venture capital funds. .

To acquire the assets of 3i, DFJ Esprit launched a new fund called Encore Ventures, with £ 170million from Coller Capital and HarbourVest, two of the biggest investors in the secondary market. The fund includes around £ 40million for follow-on investments.

Three 3i venture capital executives join Encore: Krishna Visvanathan, Nigel Pitchford and Jean-David Chamboredon. The agreement includes 3i’s stakes in Apatech, a specialist in synthetic bone; Fast Booking, a hotel reservation service on the Internet; Icera, a manufacturer of cell phone chips; Light Blue Optics, a developer of laser projection systems; and The Cloud, a wireless network operator.

He valued the 29 venture capital investments at a 16% discount to their book value at the end of March and around half the cost of 3i’s initial investments, some of which were made more than 10 years ago.

“There is so much money in the secondary markets looking for deals,” Cook said. “If we find other deals – likely to be worth between $ 50 million and $ 100 million – we’ll put together a deal and bring it to market.”

Mr. Cook founded DFJ Esprit in 2006 by merging Cazenove Private Equity with Prelude Ventures and selling a minority stake a year later to Draper Fisher Jurvetson, the Silicon Valley venture capital group.


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