Ventana Aims for $200M for U.S., Mexico Funds
By RAJIV VYAS
Come June, Thomas Gephart hopes to be sitting on $200 million in new venture money.
Gephart, the founder and chairman of Irvine-based Ventana Capital Management LLC, is looking to raise $100 million for his firm’s fifth U.S. venture fund. Ventana Global, the firm’s Latin American affiliate, is seeking another $100 million for its second Mexican fund. Both are expected to close by midyear.
The first round of fundraising for Ventana’s U.S. fund closed in November, raising $20 million from foreign investors, according to Gephart. Most of the backers of Ventana’s prior fund took part in the first round, he said.
Raising money for venture funds isn’t easy these days. Local venture capitalists have had to settle for less than they set out to raise lately due to uneasiness among institutional investors. Ventana has spent almost a year raising its U.S. and Mexico funds,it started pitching its Mexico fund about six months ago, while the U.S. fund effort started in March.
“We know it’s a challenge,” Gephart said. “But we have excellent financial results so everything should flow well.”
Formed in 1974, Ventana probably is the oldest venture firm in Orange County. Gephart started Ventana as an angel fund after selling his two-year old startup Interlink Co. in the early 1970s.
In 1982, Ventana raised $12 million for its first fund. Since inception, Ventana has raised some $100 million for four funds. It currently has $40 million in investments under management.
Ventana’s global connections make it unique among OC venture capitalists. So far, all the money raised for Ventana’s U.S. funds have been from global sources.
For Ventana’s first fund, the firm raised money from Scandinavian pension funds, insurance companies, banks, corporations and other investors. In the firm’s three other funds, institutions and investors from Japan, Sweden, Norway, Denmark and Belgium took part.
Ventana’s funding sources include Japan’s Mitsubishi Chemical Corp., Mexico’s Petr & #243;leos Mexicanos and Switzerland’s ASEA Brown Boveri Group.
In all, Ventana’s four funds count 82 institutional investors from 20 countries.
Ventana, which means window in Spanish, got its start as a way for global investors to access the U.S. market, Gephart said.
For Ventana’s fifth U.S. fund, the firm is looking to tap institutional investors here as well. Ventana is looking to raise as much as $60 million from U.S. investors for the fund, Gephart said.
Ventana invests in early stage technology and medical companies. Most of the firm’s investments have been in California companies.
Some of Ventana’s hits include San Diego-based Cymer Inc., a maker of lasers used in semiconductor production that’s a standout on Wall Street. Ventana multiplied its investments in Cymer by some 50 times in less than four years, Gephart said.
Another winner was La Jolla-based Agouron Pharmaceutical Inc., a maker of cancer and HIV drugs that now is part of Pfizer Inc. In mid-1999, Warner-Lambert Co. bought Agouron for about $1.5 billion, a year before Pfizer bought Warner-Lambert. Ventana got close to a 4,000% return on that one, Gephart said.
One of Ventana’s big misses has been Costa Mesa-based Tickets.com Inc., the stock of which has dropped from 22 in late-1999 to around 2 today. Last year, Gephart helped Tickets.com raise $17 million in funding that helped keep the company going.
“I am cautiously optimistic about Tickets.com,” Gephart said.
In all, Gephart said Ventana’s second and third U.S. funds achieved compounded returns of 20% to 30%. The firm has bankrolled some 70 companies since its inception and has an active portfolio of 14 companies. Ventana has invested most of the money raised for its four funds.
Ventana Global is managed separately and at an arm’s length, according to Gephart. While Ventana Capital operates out of Irvine and San Diego, Ventana Global has offices in Chile and Mexico.
Ventana Global invests in Latin American companies via a $20 million Chile fund and a $36 million Mexico fund. Gephart is the chairman of Ventana Global and Ventana Capital.
Ventana Global was formed with the intention of helping to build markets and bring a sort of technological leap in Latin America, according to Gephart, who sat on the senior President Bush’s environmental cross border committee with Mexico in the early 1990s.
“As a result of that,and some friends that we have in Mexico as well as NAFTA,we were asked to manage a fund called the North American Environmental Fund,” he said.
The fund’s investments are focused on companies that help to improve the Mexican economy and environmental awareness. Portfolio companies include Celsol SA de CV, a maker of solar energy products, and Colorantes y Oxidos SA de CV, a producer of iron oxide pigments.
“The most important message to take away regarding our Latin American funds is that we are helping to build markets there,” said Casey Horton, the firm’s vice president and manager of its technology investments.
But venture investing in Latin America is in its infancy. Cashing out of investments there takes longer than in the U.S., Ventana officials said.
“Several liquidity events are currently being negotiated,” Horton said.
