Money is pouring into venture capital markets, and directing a major sluice into his fund last week was Frank Kline, founder of Kline Hawkes & Co., the West Los Angeles venture capital outfit. Kline has just won a $100 million commitment from the $170 billion California Public Employees Retirement System, or CalPERS, for his new fund, Kline Hawkes Pacific L.P.
“They more then doubled their commitment,” said Kline, referring to the $45 million that CalPERS sank into Kline’s previous fund, Kline Hawkes California L.P. “The (CalPERS) staff had only recommended a $75 million allocation. But the investment board (of CalPERS) liked us so much they upped it to $100 million.”
Kline plans to raise $300 million total for his new fund, probably within the next 60 days.
Washington, D.C.-based Union Labor Life Insurance Co. (Ullico), an arm of union pension funds, will also ante up, said Kline.
It’s not too hard to figure out why CalPERS and others are thumping cash down on the barrel. Last year, Kline doubled his investors’ money.
With Internet stocks going bananas, Kline was exquisitely positioned as an early investor in such home runs as Pasadena-based GoTo.com (search engine host), San Jose-based AboveNet Communications Inc. (Internet service provider), and Ann Arbor, Mich.-based Campuslink Communications Inc. (which makes campuses Web-friendly).
Kline thinks there are long legs left in the e-venture game. Besides, he largely invests in Internet infrastructure companies, and tends to liquidate part of his positions soon after the initial public offering.
“We are running a fund for profit. We will sell parts of position on the way up,” said Kline. “This isn’t just about the ride.”
Kline said the “L.A. is a hotbed for startups” tune rings true. “We are investing most of our money between Santa Barbara and San Diego. It’s real,” he said.
Going Global
Houlihan Lokey Howard & Zukin, the Century City-based finance and corporate evaluation shop, is going global it announced that it has merged its research arm, Mergerstat Holdings L.P., into Manchester, England-based Corpfin Ltd.
Both Mergerstat and Corpfin specialize in corporate finance information services. Mergerstat is known for its quarterly releases on the aggregate dollar volume of mergers involving U.S.-based companies a service somewhat duplicated in Britain by Corpfin.
The new combined entity is named Applied Financial Information L.P., and Scott Adelson, managing director at HLHZ, has been named chairman of the merged information service. The company is owned half-and-half by HLHZ and Corpfin.
“In this global business environment, the combination of Mergerstat and Corpfin creates an industry leader with significant strategic and organizational assets,” said Adelson. “Our customers have been asking for international data, as more mergers cross national lines. With offices in both the U.S. and Europe, we are well positioned to monitor markets closely on two continents”
Adelson also said that an expansion of Mergerstat into Asia, either by acquisition or internal growth, is slated.
While the financial press concentrates on Mergerstat’s general release on merger activity, its value to paying business customers lies in its large and constantly updated database of mergers, easily broken down by sector, size of transaction, or other variables. Thus managers mulling corporate marriages (or investors) can determine how the market has valued similar deals. Incidentally, the database has also been a valuable tool for litigating attorneys, who sometimes claim that a corporate merger understates true asset values.
Going forward, Adelson hinted that the new Web portals would provide more than mere information, and that the site may become a place where companies actually seek merger partners.
Mergerstat research is available at Mergerstat.com and XLS.com, and through the online information services of FactSet, Lexis-Nexis and Bloomberg.
In other news about HLHZ, Century Park Capital Partners L.P., an equity investment fund affiliated with HLHZ, announced it has completed a new round of fund raising, and has another $106 million in the bag. The fund will target long-term, $5 million-to-$15 million private equity investments in middle-market companies, primarily through recapitalizations (such as partial sales), management buyouts, later-stage growth financings and employee stock option plans.
One major source of investors for the fund was managers of businesses that the fund had backed in leveraged buyouts in previous years. A “substantial” amount of capital was raised from “former management and owners with whom we have invested in the past,” said Martin Jelenko, managing partner of Century Park. “That commitment clearly demonstrates our ability to create financial solutions that support the objectives of the owners and managers with whom we invest.”
Brain Food
Randall Kaplan, the financier who left SunAmerica Inc. to work on Internet service outfit Akamai Corp. in 1998 (a huge hit on Wall Street), and then last year started his own venture fund, Jump Investors LLC, last week raised $3 million for the TheBrain LLC, a Santa Monica-based computer software company.
TheBrain’s key software product is touted as dramatically speeding up the search process for computer files. Some Web celebrities participated in Kaplan’s round of financing, including Mike Santullo, founder of Four11 and the original creator of Yahoo! mail; Michael Egan, chairman of theglobe.com and former chairman of Alamo Rent-A-Car; and Ester Dyson, chair of EDventure Holdings.
Santa Monica-based eCompanies Inc. was also an investor in the round of financing.
Kaplan said he expected this round of financing to be used up in four to six months, and that a larger, follow-on round of venture-capital raising would then ensue. Kaplan guesses the next round will range from $8 million to $12 million, and also added that TheBrain is seeking a “known” individual to serve as CEO.
There are three versions of TheBrain’s product available; one for personal computer users, one for engineers and other technical users of computers, and one for webmasters.
Kaplan emphasized that businesses, rather than individuals, are the primary target customer for TheBrain’s products. “We’ve had many conversations with Fortune 1000 companies about using (TheBrain products),” said Kaplan. “Major revenues will come from business-to-business applications.”
Contributing Columnist Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. He can be reached at [email protected].
