Friday, October 3, 2008

Softbank draws $100M for new fund

By Christopher Calnan

Venture capital firm Softbank Capital has raised $100 million of a planned $200 million to $250 million fund that the firm said it plans to close in 2009.

The only investor for the initial tranche was Softbank’s parent company, Tokyo-based Softbank Corp. The remaining balance is expected to come from other limited partners, Softbank partner Steven Murray said.

The firm’s previous fund, which closed in 2004, totaled $250 million, he said.

The limited partnership of investors for the latest fund was established in August, according to a filing with the U.S. Securities and Exchange Commission.

Softbank Capital, which operates with two partners in Newton and four in New York, invests in early-stage companies operating in software, technology-based services and digital content, Murray said. About 70 percent of its portfolio companies are on the East Coast, primarily in Greater Boston and New York. Investments include Cambridge-based Sermo Inc., Chelmsford’s Desktone Inc., New York-based KickApps Corp. and San Diego-based V-Enable Inc.

Softbank Corp. is a conglomerate founded in 1981. It also acquired and sponsored COMDEX, a major computer show in the United States, before selling it to Key3Media in 2001. Before establishing Softbank Capital and its 2004 fund, Softbank Corp. operated a corporate venture arm that invested in companies such as Yahoo Inc. and more than 50 hardware, software, communications and Internet companies in the United States and Japan.

In the first half of 2008, seven New England venture capital firms closed funds totaling $1.6 billion, down from  the 11 firms that raised $2.8 billion during the same period last year, according to Dow Jones VentureSource. However, current economic conditions have made it difficult for investors to realize returns through initial public offerings or mergers and acquisitions. During the third quarter, the amount of capital venture-backed companies generated through IPOs and M&As declined 66 percent versus the same period last year, according to the same source.

VC-backed companies garnered $4.57 billion in liquidity during that three-month period compared with $13.4 billion in the third quarter 2007. Only one venture-backed company, Texas-based Rackspace Hosting Inc., completed an IPO, during the quarter.

It’s too early to tell if the national economic crisis will make it more difficult for VC firms to raise funds, National Venture Capital Association president Mark Heesen said. Nationally, he doesn’t expect the next cycle of fundraising to begin until late 2009.

Meanwhile, the volatile economy may prompt limited partners seeking long-term alternatives to consider VC investments, Heesen said.

“A lot can happen in seven to 10 years,” Heesen said. “A lot of (limited partners) are looking beyond the headlines today.”