Ventana Capital Management, the county’s longest-running venture capital firm, is readying a $200 million fund for investments.
The news comes on the heels of Ventana’s move to San Juan Capistrano, where it’s combined its San Diego and Irvine offices.
“Ideally, all holdings should be within an hour’s drive,” said Tom Gephart, Ventana’s chairman and founding managing partner.
As for the latest fund, Ventana VI, the firm’s looking to invest in energy, technology and biotechnology startups, according to Gephart.
Ventana’s set to invest in about four companies a year from the new fund, he said. It will be fully invested with about 15 companies, according to Gephart.
Ventana, Spanish for “window,” was started in 1974 by Gephart to provide foreigners access to U.S. markets. The company’s first own fund was formed in 1984 with $12 million.
The firm’s seen about $3.2 billion worth of deals during the course of its life.
Global investors “like the idea of having a California partner,” Gephart said.
The firm’s partners have invested about $200 million of their own money, according to Gephart.
In the course of a year, Ventana looks at about 1,000 potential companies to invest in.
To make the final cut, it looks at the company’s expertise, business sense and references.
Most leads for potential buys come by word of mouth, through networking groups such as Tech Coast Angels.
“Knowing how well they can network tells us something,” Gephart said.
Once a company has been selected, Ventana usually serves as a lead investor, placing an initial $2 million. It then recruits other funds to join.
There are typically about five rounds of investing. After about $50 million to $60 million is invested, the company typically is sold.
Average holding periods are two to five years. Ventana often sells its stakes to bigger companies.
Ventana has invested in about 76 companies in all. It’s seen returns of four to 35 times its initial investment, Gephart said.
Local companies Ventana’s invested in include PairGain, now part of ADC Telecommunication Inc. The firm saw a nine times return on that one.
Others, such as McGaw Inc., gave Ventana a three times return. The device maker now is part of Germany’s B. Braun Melsungen AG. It employs about 1,500 people in Irvine.
A recent OC investment is being wrapped up. Ventana’s invested in Irvine-based telecommunications gear maker Aktino Inc.
Ventana likes to keep a close watch on its investments, Gephart said. It puts considerable effort toward keeping companies in Southern California as well as attracting them.
San Juan Move
“It’s exciting to have a venture cap firm here in south Orange County,” said Orange County Supervisor Pat Bates, who was on hand at the office’s grand opening. “They’re in the same league as what we’ve found in Silicon Valley.”
With only a handful of venture capital firms here,compared to more than 400 in Silicon Valley,Gephart feels there is room for more.
“Southern California is underserved with venture capital,” he said.
In attracting money from outside, being in Southern California also makes it harder to compete with Silicon Valley.
There’s a higher bar to raise money in OC than there is in Silicon Valley, according to Matt Lawson, Ventana’s vice chairman.
Ventana travels the world to bring companies home.
That was the case with a Scandinavian pharmaceutical company called Nuco when Gephart had brought it to the U.S. It eventually became Maxim Pharmaceuticals Inc. in San Diego.
It fears losing companies to elsewhere.
“Money dictates location,” Gephart said.
As globalization increases there also is a new requirement for potential investments.
“Today, the environment is so tense, it must be global from day one,” he said.
The firm is bullish on the healthcare and tech sectors here.
“Orange County has a great concentration in diagnostic medical devices,” Gephart said. “We see a blending of technology and medical.”
