DFJ Powers Up Overseas With New Regional Funds

By: Laura Kreutzer

Jul. 9, 2008

Draper Fisher Jurvetson, long known for the network of local affiliates it has formed in far flung regions of the U.S., is testing its model overseas as six of its overseas affiliates market new funds.

The six firms, part of DFJ's 16-firm active global network, seek a total of more than $1 billion across all of the funds, according to marketing materials obtained from prospective investors by VentureWire. All but one of the overseas partners - DFJ DragonFund China - were added to DFJ's network within the past 18 months. DFJ began adding local overseas firms as part of a strategy shift that supports regional funds in different overseas locales rather than only offering a single international fund.

"You are handicapped if you are a parochial fund without a global perspective; it's hard to tap into global resources when you're a small regional fund," said Managing Partner Don Wood. "The DFJ Network is a new model for venture capital."

Wood declined to comment on any of the firms' fund-raising activities citing Securities & Exchange Commission regulations.

DFJ's network partners share not only their expertise and their Rolodex of industry contacts but also a portion of their carry, which help glue the network together, according to Wood. The various partner firms have also co-invested on some 120 deals to date.

One of the six firms furthest along in its fundraising is DFJ Tamir Fishman, a joint venture formed last year with Israeli venture firm Tamir Fishman Ventures, according to the marketing materials. The Israeli venture firm has closed on around $80 million of the $150 million that it seeks for DFJ Tamir Fishman Ventures Fund III LP, which it plans to invest in Israeli start-ups across industries that span communications, semiconductors, software, life sciences and cleantech, according to the materials.

Meanwhile, DFJ Esprit, the firm's European affiliate, plans to raise $300 million for DFJ Esprit Fund III LP, the largest target of the six overseas funds. The affiliate invests in early and late-stage deals in Europe, including Ireland, France, Germany, Scandinavia, Spain, Switzerland and the Benelux countries.

In Europe, the firm invests between $1 million and $25 million with half of the deals in early-stage but around two-thirds of the money going to later stage or growth companies.

The new fund succeeds around $560 million that Esprit Capital Partners raised across two pools before DFJ bought a stake in its management company last year.

Further East, DFJ VTB Aurora, a joint venture formed last year between DFJ and Russian commercial bank VTB, aims to raise $150 million for its first fund under the DFJ banner. DFJ VTB Aurora focuses on deals in Russia and the Commonwealth of Independent States or ones outside of Russia that target Russian resources. The team already manages a $150 million pool of capital raised by VTB, nearly half of which came from the Kremlin, and has invested in companies, such as Combarco, a company that produces an energy efficient industrial motor.

DFJ's network also extends to Asia, where DFJ Athena is seeking $100 million for DFJ Athena Fund I to invest in South Korean companies and U.S. companies that market their services or goods primarily to Korean markets. The firm has already held a first closing of the fund, although the materials did not state how much the joint venture has raised so far. DFJ formed the joint venture with Silicon Valley-based Athena Technology Ventures last year and focuses on early and expansion stage deals.

Meanwhile, DFJ DragonFund China, a Chinese affiliate that joined the network in 2006, plans to raise $200 million for its second fund, double the $100 million that the firm raised for its debut offering. DFJ DragonFund has so far invested in 20 companies, including Device VM, a San Jose-based company developing rapid-start computing technologies, and PPLive Inc., a Shanghai-based operator of a peer-to-peer video site.

Finally, in Latin America, DFJ formed a joint venture with Brazilian firm FIR Capital Partners last year and has begun marketing its DFJ FIR Brazil Fund II LP with a $150 million target. The firm expects to launch the fund in the first half of 2008 with committed capital of R$170 million ($105 million), according to FIR Capital's Web site.

Founded in 1999, FIR Capital Partners manages at least six other funds, including some focused on specific regions within Brazil that can share deal flow with the new DLJ FIR fund. However, the DFJ FIR Brazil Fund may also back companies that fall outside of the purview of FIR's regional funds, according to the Web site.

As DFJ expands its global network the firm is selectively looking to add a few more partners in locales with robust economies, promising management talent and an entrepreneurial culture. For example, the firm has its eye on Japan, Turkey and possibly Southeast Asia.

"We're not afraid to be ahead of the pack," Wood said. "There's more work by going in early, but we're believers that in the long term, there are more rewards."