DFJ closes debut growth-stage fund on $290m

Draper Fisher Jurvetson has again broadened its investment strategy with closure of its debut growth-stage fund, DFJ Growth, on $290 million (€203 million). The closure follows the Silicon Valley venture firm’s geographic expansion in recent months to Europe, Israel, Russia and Brazil.

Unlike the 22-year old firm’s early stage-focussed core funds, DFJ Growth will pursue Series B and Series C tech investments in companies “where technical risk is behind the company and there’s some evidence of market validation in terms of revenues or bookings, or in some cases, subscribers or users,” said Mark Bailey, a managing director of DJF Growth and former executive at Symantec and Healtheon/WebMD.

Typically that will translate into companies around the globe with quarterly revenues of around $100 million, and will result in initial investments ranging from $8 million to $10 million, or as much as $20 million over several rounds, Bailey said. Up to 20 percent of the fund’s investments will be made outside the United States.

DFJ Growth differentiates itself from other growth stage venture funds because “we tend to invest earlier than other late-stage funds and we’re swinging from the fences”, Bailey said, invoking a baseball analogy that alludes to scoring elusive “home runs” as DFJ has done previously with investments like Skype and Hotmail.

The fund’s approach to building a portfolio of 20-some companies, he said, is to own roughly 10 percent of each company that it sees as a possible “home run”, or with the potential to value $1 billion and result in a lucrative exit.

“If the company is indeed worth $1 billion dollars, we have a chance on any given investment to pay back the fund,” Bailey said. “We’re going at this in a very DFJ style, targeting companies that are serving very large markets, companies that are [market- or technology-] disruptive.”

DFJ Growth’s industry focus is also similar to DFJ’s core strategy, which tends to be IT-centric; it includes areas such as digital conversion, cleantech and nanotech.

“Further out,” Bailey said, “we’re really intrigued by the intersection of life sciences and IT” such as genomics.

DFJ Growth had an initial target of $250 million and since its first close in August 2006, has invested approximately 25 percent of its total committed capital in five companies: Kajeet, a pay-as-you-go mobile phone service for ‘tweenagers’; Visto, a provider of email applications for mobile phones; Californian solar energy systems provider Solar City; UUSSEE, a Chinese company providing television content via internet; and Raydiance, creator of the world's first desktop ultra-short pulse laser, which allows for “very fine machining of cellular structures or materials”, Bailey said.

“Each one of these has the chance to become a very successful company” leading to a large sale or initial public offering, he added.

In addition to Bailey, the fund’s team is led by former AOL chairman and chief executive Barry Schuler and DFJ managing director and co-founder John Fisher.

Via its global affiliate network, DFJ has offices in 33 cities worldwide and manages roughly $5.7 billion in capital.