It had to happen: a tech-oriented fund in Los Angeles looking to take positions in or buy distressed companies at a discount.
The two things that Los Angeles financiers do best fund high-tech ventures and take on troubled financial situations come together in the new Beverly Hills-based Brighton Venture Partners Inc. fund, started by L.A. money veteran Marshall Geller.
The fund may be new, but the 61-year-old Geller has been banging around L.A. financial circles since before Beatlemania, spending 21 years with Bear, Stearns & Co. (He started there in 1967 as a senior managing director and rose up to run most of the firm's banking offices west of New York City.)
Since 1991, Geller has been more or less merchant banking under his own shingle, and now is chairman, CEO of Geller & Friend Capital Partners Inc.
Geller plans to point his new $100 million fund at tech companies that are too small to warrant review by the big brokerages, and that also need capital or, more likely, some serious restructuring to get to the next stage of growth.
"A lot of tech companies are finding they can't get that second or third round of financing," said Geller. "They are going to have to merge with other companies, or possibly (consider) management leveraged buyouts as another possible scenario."
Geller will be looking for situations to invest from $5 million to $20 million in either debt or equity (or both), but he will look at smaller deals if the situation is attractive enough.
In the process, an old tool of financiers, the management LBO, may come back in favor. "We may incentivize management by buying a company in concert with them," Geller said.
Under U.S. tax code since last year, companies can no longer simply lower a stock option price for employees without incurring tax liabilities. Thus, getting employees charged up might be better accomplished by making them owners right away, rather than in the future.
Though having long soldiered in the finance wars, Geller has kept abreast of technology and, notably, acted as angel investor and early-stage merchant banker for Santa Monica-based iMall.com, which was gobbled up last year by Excite@home for $518 million.
"When iMall was bought, it had revenues of $2 million a year. I don't think that deal would get done today, quite frankly," said Geller.
(Richard Rosenblatt, iMall founder, is an investor in the new Geller fund.)
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