If everything goes as planned, Odyssey Strategic Partners LLC soon could be one of the largest Orange County-based venture capital firms.
Newport Beach-based Odyssey is planning to raise $300 million in the next few months for its second venture fund,Odyssey Strategic Equity II. The firm’s backers plan to invest the money in technology and traditional companies.
This will be the second fund from Odyssey in the past year and a half. The first fund, Odyssey Strategic Equity, has around $20 million in 14 start-up companies. If the second fund is able to raise the targeted money, Odyssey could surpass Newport Beach-based Forrest Binkley & Brown, which according to the Business Journal’s 2000 list had $305 million under management.
“We are very excited here,” said Jeffery Brady, chief operating officer and an Odyssey general partner.
Equity II also would be among the few venture funds that primarily target Southern California companies.
“Early stage companies in Southern California are virtually starved for financial capital,” said Walter Schindler, chief executive, founder and senior general partner at Odyssey. “We feel Southern California is ready for value creation.”
Odyssey’s partners are familiar names. Brady was director of mergers and acquisitions at Rockwell International Corp. Alan Sellers, general partner and vice chairman, was a general partner of Westar Capital, a private fund backed by George Argyros. He also worked as a right-hand man to Dole Foods Inc. Chairman David Murdoch. Earlier in his career, he worked as a mergers and acquisitions specialist with O’Melveny & Myers LLP.
Before starting Odyssey, Schindler was the regional managing partner of Gibson Dunn & Crutcher LLP, specializing in mergers and acquisitions and advising institutional investors. His claim to fame: strategic planning and advice for the spinoff of Pacific Investment Management Co., or PIMCO, from Pacific Life Insurance Co. He also was with EPS Solutions Corp., a high-powered outsourcing services consulting group that came out of Deloitte & Touche and broke apart after Schindler left.
“All of us have some sort of experience in running, managing or mentoring companies,” Sellers said. “The three of us are pretty senior for venture capital firms. We are all older than we would like to be.”
Raising venture money at a time when Wall Street is sputtering could pose a challenge for Odyssey. Crosspoint Venture Partners, which is based in Woodside and has an Irvine office, last year scrapped the idea of raising a $1.1 billion fund because of poor market conditions. Other funds also have downsized operations and put fundraising on hold until things improve.
“This is definitely a very tough market and I won’t deny that,” Sellers said. “But we have had a successful run so far despite that.”
So far, one of the 14 companies in Odyssey’s first fund has exited, Chicago-based RevenueLab. The business software company was acquired for $7.4 million in January by Bellevue, Wash.-based Onyx Software Corp.
“We almost tripled our investments in four months in RevenueLab,” Schindler said.
The Odyssey Strategic Equity started about a year and a half ago to invest seed capital in startups. It also has equity stakes in some companies, which Odyssey received in exchange for consulting services. The majority of the first fund’s capital was raised from investors familiar with the firm’s partners. The fund counts some 30 institutions and wealthy investors, including Brian Kelley, vice president of investment services at Credit Suisse First Boston Corp., and Albert F. Bender III, managing director and head of private placement at A.G. Edwards & Co.
For Odyssey’s next fund, the partners plan to raise the targeted $300 million in two rounds. The first round, which will close sometime in September, is expected to raise about a third of the total, the partners say. The second round, which will close in the first quarter of next year, is pegged at $200 million.
Sellers said he isn’t worried about short-term market fluctuations impacting the long-run performance of venture capital firms or hinder their fundraising ability.
“If you have a good investing model and track record, then fundraising should not be a problem,” he said.
“Yes, the stock markets are down right now,” Schindler said. “But who knows what the markets will be 10 years from now.”
Some 14 institutional investors have given early indications of participating in the second fund, Schindler said, and the fund could meet its $100 million first-round target by June. n
