Crosslink closes fifth hybrid VC fund on $400m

The San Francisco venture firm has closed what it says is the largest-ever ‘crossover’ fund, a tech-focussed vehicle that is both a hedge fund and a venture fund.

Crosslink Capital has held a final close on its fifth “crossover” fund at its $400 million (€272 million) hard cap. Its first close was in March 2007 on $250 million.

The San Francisco firm’s previous such vehicle, which employs both hedge and traditional venture fund strategies to invest in public and private securities of tech companies in various growth stages, closed on $280 million in December 2003.

While a handful of Silicon Valley venture firms, such as Firelake Capital Management and Integral Capital Partners, employ similar strategies, Crosslink co-founder Michael Stark told PEO that its Crossover Fund V is the largest-ever such hybrid fund raised to date.

“It’s not a common strategy because it’s not the way most limited partners are organised,” Stark said. “When we are marketing the fund we really need to go to pioneers in the LP community who see the value of our strategy.”

It's not a common strategy because it's not the way most limited partners are organised.

Mike Stark

As opposed to Crossover’s five traditional venture funds, the most recent of which closed on $254 million in April 2006, the “investor list for the Crossover Fund does not look like a typical group of large institutions”, Stark said, noting that those with strict bucket systems aren’t likely to be on the roster.
The fund attracted approximately $300 million in capital from returning investors, and the balance from new limited partners, Stark said. No placement agent was used, and LPs paid their commitments in full, up front, rather than via capital calls.

While there is no strict mandate as to the percentage of public versus private securities in which the fund will invest, Stark said it will be roughly a 50-50 split.

“We don’t want to be pinned down,” he says, but estimates the fund will likely build a portfolio of 30 public and 30 private securities.

“Our belief is that you want to be engaged with the number one or number two companies in each of [the] new sectors that emerge and be involved with them as early as possible,” Stark said. “Seed stage is best,” he said, though added that getting involved at an appropriate “inflection point”, which in some cases could be a financial restructuring or turnaround, can also be an excellent opportunity.

Crosslink’s Crossover Fund V made has already made a number of investments including four private investments in two alternative lighting companies and two solar panel manufacturers and an investment in publicly traded First Solar.

The 17-year old firm began employing its crossover strategy in 1995; between its crossover and traditional venture funds, it has more than $1.4 billion assets under management.