San Francisco-based Vector Capital announced the close of its third fund on $350 million (€272 million).
The newest vehicle will focus on buyouts, spinout and recapitalisations of established technology companies, with a particular emphasis on software. According to Vector managing partner Alex Slusky, his firm will address the intersection of the buyout and venture capital markets.
“A lot of companies fall into the ‘no man’s land’ between large buyout funds which don’t target technology deals, and venture capital funds, which focus on startup and early stage companies,” Slusky said. Vector will also closely focus on non-core business segments of large public companies for potential spin outs.
Vector aims to make investments of $30 million to $100 million each for a total of between eight and 10 transactions during the lifetime of Fund III.
Fundraising for Fund III began in the Spring of 2004 and exceeded an initial $250 million target. Slusky said Vector had strong support from existing limited partners, two-thirds of which returned for the new fund. Approximately 70 percent of investors were US-based, with the remainder of capital coming from Europe.
Vector’s Fund II, raised in 1999, closed on $170 million. The firm began in 1997, when Slusky, who had managed the technology investing team at New York-based Ziff Brothers Investments, spun his team out to form Vector Capital. The firm’s inaugural fund was a $40 million vehicle with Ziff Brothers as the sole limited partner.
Vector is one of a number of funds addressing the technology niche between buyouts and venture capital funds. Last April, Redwood City, California-based newcomer Garnett & Helfrich Capital successfully raised a $250 million debut ‘venture buyout’ vehicle to focus on buying out underperforming and non-core businesses, product lines, and divisions from public companies in the communications, Internet, media, semiconductor and software sectors. Elevation Partners, the media and entertainment fund launched by Silver Lake co-founder Roger McNamee, is also in the process of raising a $1.5 billion fund for “venture buyout” investments in the media and entertainment sector.