Financial Technology Ventures, a venture capital firm backed by some of the largest financial services companies, is hoping to collect $400 million for its second fund.
According to sources familiar with the plans, the San Francisco firm will close the fund in the next 30 to 60 days and expects most of the 21 limited partners who invested in the first fund, including Credit Suisse Group, Bank of America Corp., Bank One Corp., Deutsche Bank AG, and Wells Fargo & Co., to invest in the second.
The firm, which declined to comment for this article, is managed by James C. Hale 3d, Robert Huret, Scott Wu, and Richard Garman all former executives of Montgomery Securities in San Francisco.
FT Ventures invests in middle- and later-stage technology companies that develop products and services for the financial services industry. The firm uses its base of industry partners to learn about new technology ventures that might make good investments.
This strategy works the same way for the firms investors. Jeremy Marshall, managing director at Credit Suisse First Boston, said FT Ventures acts as a clearinghouse for the limited partners to exchange ideas, or a community where you have FT Ventures in the middle. An investor can call the firm and ask its partners if they have heard of a particular technology company, he said.
Such funds allow banks to make investments in promising emerging technologies without assuming all the risks on their own.
FT Ventures launched its first fund with $200 million two years ago. So far half of it has been invested in 19 companies throughout the United States and Canada. The firm is considering using a small portion of the second fund to invest overseas.
Three of the companies in which it invested with the first fund have had initial public offerings. Two of the companies 724 Solutions Inc. of Toronto and Corillian Corp. of Beaverton, Ore. are online banking software providers. The third is Valicert Inc., a Mountain View, Calif. company that certifies e-commerce transactions.
Shares of 724, which went public in January, closed its first day of trading at $71.81 a share, and closed Wednesday at $26.8125. Corillian went public in April and had a first-day close of $8.50. Its stock closed Wednesday at $13.0625. Valicert went public in July. Its shares closed Wednesday at $14.0625, up from its first-day close of $11.88 a share.
After FT Ventures first fund closed in July 1998, 16 other financial institutions, including Morgan Stanley Dean Witter & Co., Merrill Lynch & Co., and Paine Webber Group Inc., approached the firm seeking to invest in it. But since the fund could not accept additional investments, the firm signed agreements with these companies to exchange insight into the latest technology trends for assistance with deal flow and due diligence.
FT Ventures expects that some of its new partners will join its previous investors in the second fund. The firm collected a 2.5% management fee from the investors in the first fund and keeps 20% of the profits a structure it intends to maintain for the second fund.
Each of the companies in which FT Ventures has invested received between $5 million and $8 million, but the firm plans to increase the average investment size slightly for the new fund to better accommodate the needs of the companies in which it is investing.
The firm hopes that the capital from its second fund will last about three and a half years, a year longer than the first is expected to last, the sources said.
