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Vintage Investment Partners Announces Close of $200 million Technology Fund of Funds

Apr, 2016
Vintage Investments

Vintage Investment Partners announced today that it has completed the closing of Vintage Investments IX, its latest fund of funds and discretionary managed account platform, with $200 million of commitments.

The fundraising target for Vintage IX was $175 million, however, the fund was over-subscribed. The funding was mainly secured from leading US, Canadian and Israeli financial institutions, endowments, foundations and family offices. Vintage’s previous fund of funds raised $144 million. The closing of Vintage IX brings the firm to approximately $1.3 billion under management.

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The North Face of Innovation

Aug, 2015
Alan Feld

Having grown up in Toronto, I got used to the idea of eight-week summers.
My previous forays in Sweden allowed me to relive Canadian weather. This time, which I went a couple of months ago, I did not have to blow the dusk off my parka.

Stockholm is an absolutely magnificent city, but when you have glorious late spring weather, it is incomparably beautiful.

Stockholm is perched strategically, almost as a bridge, between a series of fresh water lakes and rivers on one side and outlets to the Baltic Sea on the other. But, Stockholm is not only a terrestrial bridge, but an economic (and even cultural) one as well, between the Nordics and international markets.

I had the pleasure of attending the Creandum annual meeting in Stockholm and leveraged the opportunity to meet many investors and companies and the Swedish government agency promoting international investment in Sweden.

In many ways, the Nordics are the best kept secret of venture capital in Europe.
The Nordic venture market represents approximately 10% of the total annual venture investment volume in Europe and only 2% of venture capital internationally. Yet, based on the data that Creandum shared with me (containing approximately 500 European exits), over 50% of the European unicorns and 10% of the global unicorns over the last number of years have come from the Nordics or were started by Nordic entrepreneurs.

Sweden itself represents half of the value created in the Nordics. Some of these Nordic-based or Nordic entrepreneur-founded, billion dollar and multi-billion dollar companies include Expekt, JustEat, King, Mojang, MySQL, QlikView, Rovio, Skype (started in Baltics but moved to Sweden), Spotify, Supercell, Zendesk, etc.

There is a perception that the Nordic venture capital market is a derivative of the games development market. While King, Mojang, Rovio and SuperCell have all been companies founded in the Nordics, the reality is much broader than that.

For example, Sweden has historically been a hub of innovation, inventing such diverse things as automatic identification systems, ultrasound, the pacemaker and even the modern zipper. Today, several other cutting edge technologies are being developed in the country.

First, there is a strong ecosystem in hardware and communications development. “Ericsson refugees” have started several companies, including one of the leading Bitcoin chip developers (KnC). “THINGS”, a hardware accelerator recently opened in Stockholm, backed by ABB, ASSA ABLOY, Husqvarna, NCC and SEB, is incubating, among other things, some cutting edge Internet of Things companies.

Second, the strong culture around music and the arts have made the Nordics one of the world’s leaders in music production. The combination of communications technology infrastructure together with innovation in music promotion not only created Spotify, but also emerging players such as Epidemic.

Third, there are some very interesting software companies coming out of the Nordics. QlikView Software is a world leader in the business intelligence and data visualization space and Klarna, which provides payment services for online storefronts, is one of the most interesting eCommerce infrastructure companies anywhere.

Fourth, a strong oil and gas sector and fish industry in Norway have produced some of the most innovative technologies in both sectors. Declining oil prices have had a short term impact on financing, but the domain expertise combined with the skills sets in communications and software have produced very promising and some very successful companies.
But, above all, the Nordics are producing great entrepreneurs. Danes, Finns, Icelanders, Norwegians and have had a cultural history from the days of Leif Erikson and Canute of being outward bound. More than most other countries in Europe, this embedded internationalism is producing companies that are created to be global from day one. Similar to Israeli entrepreneurs, Nordic founders are moving to the Valley to build their companies and there is a growing Nordic diaspora around San Francisco and Palo Alto.

Unfortunately, the picture is not totally rosy.

First, the venture eco-system was decimated by the 2001 crash. For example, from approximately 100 venture funds in Sweden in the early 2000s, there are six institutional grade funds currently active. This has limited the availability of local sources of growth capital; unlike in Israel where US venture funds and corporate VCs took up the slack, there are no top tier US VCs with offices in the Nordics and local corporate venturing is limited compared to other technology hubs. The glass half full of course is that this shortage of capital makes Nordic venture very much a buyer’s market, a reason that the London-based Accel Europe, Index and some others are very active in the region and are doing particularly well there.

Second, the tax regime is not particularly startup friendly. For example, employee options in Sweden are treated as ordinary income. While other governments around the world have recognized the importance of the small business sector to a flourishing economy, Sweden’s is actually penalizing employees who are creating innovation.

Third, there is a screaming absence of data about the private technology market. The Nordics are plagued by what many other countries in Europe suffer; the “Venture Capital Associations” are controlled by buyout firms with little, if no, interest in promoting technology startup formation, let alone providing the data needed to attract foreign growth capital to the market. For example, finding data in English about new technology company formation in the Nordics, how much money is being invested by stage or sector or even how much money is managed and available for investment in the region is a Herculean task. Creandum, at its expense, started become a data provider for the region.

But, despite those limitations [imagine what would happen if these challenges were solved…], the Nordics are on the rise and we think are a super-attractive investment market. My only advice: Go there in the summer…

 

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Confronting the “S” Word: Dealing with General Partner Succession

Apr, 2015
Alan Feld

It is typically the question that you leave for the end when you meet a venture capital management team for the first time. “Sounds really interesting, but how do you see the firm developing? Have you established a plan for succession to a next generation of GPs”? At that point, the great eye contact that you had with the manager during the meeting is replaced by lots of squirming in their chairs.

Why is VC General Partner Succession Important?

Succession is a real issue.

In a time when there is a huge supply of early stage investment capital, VCs are as much selling themselves to entrepreneurs as entrepreneurs are selling their companies’ stories to VCs. Truly great entrepreneurs are in shorter supply than is commonly believed and the competition to invest in those entrepreneurs is very intense. For entrepreneurs who have a choice, connecting to a VC that they feel understands their business, and is as hungry and as dedicated to making the company a success as they are, may be more important factors in selecting a VC than the highest bid. This is especially true for young entrepreneurs; many of the best companies created in the last 15 years have been created by entrepreneurs under the age of 30. Not surprisingly, young entrepreneurs frequently connect better with younger or youngish VCs.

Moreover, our experience is that most venture funds will use all their term extensions and then some. A venture fund, from start to finish, can take 13 years and, in some cases 16 years or more, to be fully realized. During that period, the fund will have faced at least one down market or financial crisis, creating lots of challenges for the portfolio companies and lots of work for the VCs. Several very good companies will only be realized at the very end of those extension periods. An engaged, energetic, committed and hungry venture management team is as important at the end of the fund as at the beginning and not just for funds ending their lives but for the two to three additional funds that were raised along the way.

As a fund of funds in the venture industry for the long haul, we are looking to build long term relationships with our portfolio funds. When we diligence a fund manager, we are not simply looking at the current fund on offer but we are looking at the manager with the objective of committing to two or three funds out (and ideally in perpetuity). The immediate value we offer our investors today is hopefully quality selection of managers; however, if we select well, we will be offering our investors much longer term access to these great managers.
Conversely, the last thing you want to see as an LP is the implosion of the fund in which you invested because the older team will not let go or did not invest the time or resources to build a strong next generation who can take the fund forward. Unfortunately, this situation has become all too common.

So, “succession strategies” at our venture managers is not just a crucial issue to us in order to ensure that the current fund is invested in the best entrepreneurs and managed well through good and bad times, it is also fundamental to ensuring that we have invested in a long term relationship where we will be partners in multiple funds with the same manager.

Unfortunately, very few VC managers have managed success well. So, I decided to conduct a research project to determine the best practices in succession management.

Getting Succession Right

During the last couple of months, I interviewed the managing partners of several of the world’s leading VCs to see what worked in managing the succession process and what did not.

There were several common themes from the discussions that I would call the Six Rules of Succession.

First, the worst thing a GP can do is deal with this issue during fundraising of a new fund. Succession processes need to be carefully thought out and even more carefully implemented. The process needs to be triggered by the GP’s own recognition that a long term team development plan is required and not as a result of LP questions during fundraising. Planning succession or, worse, recruiting successors with the Damocles’ Sword of fundraising hanging over GPs’ heads rarely, if ever, works.

Second, you need to start the process and put the mechanisms in place at least 5 to 7 years before the current team transitions out. While most firms appear not to have a mandatory retirement age, it is very common for the founding or the current managing partner teams to start phasing out in their late 50s or, latest, early 60s. In the survey we conducted, the new managing partners on average were 44 years old. But, many of those new managing partners had been with their firms for 7 to 10 years before taking on the new role. The smart VCs were already trying to build their bench of future managing partners early, well before the transition, and, in a “try and buy” approach, seeing if they had the investment skills and brand enhancement mettle to become stars.

Third, fundraising and other firm management responsibilities should be transferred gradually to the junior team, well before the final transition date. It takes a while to build relationships between the junior partners and LPs and learn the day to day managerial challenges of managing a venture fund.

Fourth, a successful transition requires just that: a full transition. The founders and managing partners have to step aside and allow the new team to run the firm. It means that the older partners do not serve on the investment committee of new funds and leave the management decisions and certainly all the new investment decisions to the younger partners.

Fifth, it also means a transition in economics. In our research, we found that there is residual economics (carried, but rarely management fee) to the older team from the point of retirement for one or two funds at most. When you leave, you leave – managerially and economically.

Sixth, the process must have both visibility and certainty. It requires an open and genuine dialogue between the senior retiring team and incoming management team. It means clear processes, clear formulas, openly determined and set fairly through discussion and not as a decision from “on high”.

One Addition, but Critical Note: Creating the Requisite Culture

Effective succession requires an overriding element that goes well beyond the mechanics of the process. That element is establishing a firm culture and embedding that culture in the team that takes the reins of the firm.

Creating a culture in a non-hierarchical organization such as a partnership is, at best, challenging. But, the firms that we saw that succeeded effectively in the succession also had a number of common cultural elements:

  • a commitment to excellence
  • an overriding devotion to the integrity and the reputation of the firm
  • a willingness to let young partners build their own successes and make their own mistakes
  • relatively little hierarchy on decision making – every partner has the same say
  • relative equality in economics among the partners at the time of the succession
  • a willingness to openly criticize (constructively of course) one’s partners and more importantly a willingness to constructively accept the criticism of one’s partners

Despite the current heady days, running a venture capital is a marathon and not a sprint. Venture funds need to apply the same disciplines in running their own firms that they advocate to their portfolio companies. In applying those disciplines, the great managing partners will only truly succeed when they build the team that makes them irrelevant.

 

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Vintage raises $125m for co-investments

Jan, 2015
Private Equity International

This is the Israeli firm’s second co-investment vehicle, and its eighth fund overall

Vintage Investment Partners has held a first and final close on its latest late stage co-investment fund on
$125 million, according to a statement from the firm.

Vintage Investment Partners VIII was “heavily over-subscribed”, according to the firm, with commitments
mainly secured from financial institutions, endowments, foundations and family offices.

Vintage VIII will continue the strategy from Vintage V, the firm’s 2011-vintage previous late stage coinvestment
fund which closed on $80 million. The fund will co-invest alongside Vintage’s portfolio of venture
capital and technology-focused private equity funds in promising late-stage portfolio companies in Israel and
Europe.

Vintage VIII will typically invest $3 million to $10 million per company, the firm said, focusing on later stage,
revenue generating companies active in the communications, enterprise software, internet infrastructure,
semiconductors and medical device spaces.

“Our model is to join or lead rounds where the majority of the capital comes from the current investors,” said
Vintage founder and managing partner Alan Feld. “We are happy to only take observer seats on boards and
we do not need all types of veto or other unique rights.”

Prior to this fund, Vintage has raised three secondaries funds, three funds of funds and one late stage coinvestment
fund. Its latest fund of funds, Vintage VII, closed on $144 million, above its target of $100 million,
in October 2014. Vintage VI, a secondaries fund, closed on $161 million, above its $150 million target, in
June 2013. This latest fund close brings the firm’s assets under management to around $980 million.

“As a result of our secondary and fund of funds activities, we have been meeting many of Israel’s leading
private technology companies for several years,” said Vintage partner Ehud Hai. “This has allowed us to
identify in advance the companies that best fit our model.”

Vintage general partner Amit Frenkel said the new fund “offers a win, win, win to the entrepreneur, the funds
that invested in the company and to us” as acquiring small stakes in companies is not overly dilutive to the
funds or the entrepreneurs.

“Moreover, as we are not competing with the funds, there is not an issue of who is taking the credit for
leading the company or the deal,” Frenkel said.

To read the original article

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Vintage Investment Partners Announces Close of $125 million Late Stage, Co-investment Fund

Jan, 2015
Vintage Investments

Vintage Investment Partners announced today that it has completed the first and final closing of Vintage Investment Partners VIII, its latest late stage co-investment fund, with $125 million of commitments.

Vintage VIII was heavily over-subscribed, but the Vintage management team decided to maintain the hard cap of $125 million. The funding was mainly secured from leading financial institutions, endowments, foundations and family offices. Vintage’s previous late stage co-investment fund raised $80 million. The closing of Vintage VIII brings the firm to approximately $980 million under management.

To read the complete announcement

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Israeli Fund of Funds Plans International Tech Investments

Oct, 2014
Wall Street Journal

TEL AVIV– Israel-based Vintage Investment Partners has closed Vintage Investments VII, its latest fund of funds, with $144 million of commitments. Having operated mainly in Israel in previous funds, Vintage now plans to invest in funds that focus on Series A investments in the U.S., Europe and Israel.

Vintage previously invested in Wilocity Inc., a developer of a chipset that enables gigabit wireless connectivity, acquired in July by Qualcomm Inc. Other investments include international online payments company Borderfree Inc. which went public on the Nasdaq in March, content recommendation platform Outbrain Inc., and TabTale Ltd..a developer of apps for children.

The current funding was secured largely from U.S., Canadian and Israeli financial institutions, endowments, foundations and family offices. Prior to Vintage VII, Vintage raised three secondary funds, two funds of funds and a late-stage venture co-investment fund. Vintage’s previous fund of funds raised $92 million.

The news from Vintage comes on the heels of Israel–based Magma Venture Partner’s closing of a $150 million fund.

According to IVC Research Center, a tech research firm, Israel’s venture capital industry peaked in 2000 with more than $2.8 billion raised. Since 2008, local VCs have not succeeded in raising over $1 billion in a year. This year will be no different, IVC claims.

According to IVC, Israeli venture funds’ investments share of all venture investments in the Israeli market has dropped from 49% in 2005 to 24% in 2013.

“Israel is seeing an all-time high in the number of new companies being formed. This is creating a very significant opportunity for Series A investment,” said Alan Feld, Founder and Managing Partner of Vintage.

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Vintage Investment Partners Announces Close of $144 million Technology Fund of Funds

Oct, 2014
Vintage Investments

Vintage Investment Partners announced today that it has completed the closing of Vintage Investments VII, its latest fund of funds, with $144 million of commitments.

The fundraising target for Vintage VII was $100 million; however, the fund was over-subscribed. The funding was mainly secured from leading US, Canadian and Israeli financial institutions, endowments, foundations and family offices. Vintage’s previous fund of funds raised $92 million. The closing of Vintage VII brings the firm to approximately $850 million under management.

Vintage VII will focus on investing in venture capital funds in the United States, Europe and Israel and in technology-related private equity funds in Israel. Vintage VII will also buy low-funded secondary/early secondary positions in these types of funds.

To read the complete announcement

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Vintage beats target for tech secondaries fund

Jun, 2013
James Taylor

The Israeli fund of funds manager’s successful $161m fundraising highlights the increasing interest from overseas in Israeli Technology companies.

Vintage Investment Partners has raised $161 million for a new technology secondaries fund, beating its $150 million target following strong investor demand.

The vehicle, Vintage Investments VI, will buy LP positions in Israeli venture capital and private equity funds, and also look for direct secondaries deals, i.e. portfolios of private equitybacked Israeli technology companies. It also has the capacity – as with previous Vintage secondaries funds – to buy out individual shareholders in private companies.

Vintage spent about six months on the fundraising trail, according to managing partner Alan Feld. The “vast majority” of the firm’s LPs from its previous $125 million secondaries vehicle returned and increased their stake, he said, while a number of investors also committed capital to the firm’s informal co-investment pool, which provides Vintage with an extra $100 million or so of firepower.

Feld suggested that investors were attracted by Vintage’s in-depth knowledge of the local market. The firm has been operating in the Israeli technology space for ten years, and has developed a proprietary database that tracks the performance of 230 Israeli funds and nearly 4,000 private equity backed technology companies. “People are looking to invest in managers with a competitive advantage in their particular market … Not only do we meet fund managers regularly, but we also try to meet on average about 10 companies per week. That means we can value companies much more effectively and accurately, and we can make offers to sellers relatively quickly.”

Israeli companies are also seeing plenty of interest from big US technology companies looking to boost top-line growth and invest some of the cash that for tax reasons it’s difficult for them to repatriate, Feld adds. Over 70 big tech companies have already made acquisitions in Israel, Feld says, while the likes of Google, Oracle, Facebook, Microsoft and Apple all have R&D centres in the country.

One notable strategic change with the new fund will be a greater focus on European opportunities, Feld said. “We believe there’s an opportunity in Europe. We’ve started to commit to Europe on a primary basis over the last year, and we’re now starting to significantly [boost] our efforts in European technology- and venture-related opportunities. That’s an important addition to the strategy.” Vintage already knows many of these European groups because of their portfolio interests in Israel, he added.

This is the sixth institutional fund for Vintage, which is based in Herzliyah Pituach near Tel Aviv in Israel. It had previously raised two secondaries funds, two funds of funds and a coinvestment
vehicle. It now has $700 million of assets under management.

 

To the original article – PEI Vintage

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Alan Feld interview in The Marker

Jan, 2011
Vintage Investments

To read the article click here

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