Unsettled investment environment takes its toll on early-stage investors

Geocapital Partners has returned the $250m raised towards its $500m target Geocapital VI fund to investors, leaving it with $100m from previous funds to support its existing portfolio. The planning of fund VI began towards the end of last year, but the institution found that its rate of investment in the second half of 2000 had been slower than anticipated, leaving $100m of capital still to be deployed. As such, the initial commitments raised for the new fund were returned to investors. General partner Nic Humphries comments that Geocapital couldn’t see the investment environment improving during 2001 and felt that its existing capital would be sufficient to sustain its portfolio, as well as fund a number of new investments, during the rest of the year. Despite this gloomy outlook, Geocapital recently announced its $19m expansion investment in Axiom Systems, a telecommunications software company, which completed in January this year.

epartners, the venture capital arm of News Corp, has also caved in to the pressures of the volatile investment climate and returned $520m of its epartners2 fund to investors. The group capped the fund at $130m, which is just 20% of the $650m committed. No further investments will be made by epartners and the remaining capital will be used to sustain its existing portfolio. Investors in the fund included SOFTBANK and Morgan Stanley. Mark Booth, managing director of epartners stated: ‘We raised our funds in a very different economic climate than we find ourselves in today. We do not believe that new investments can generate the types of returns we expected at this time.’ epartners was formed in July 1999, a late entrant to the internet investment market, with parent News Corp committing $100m of capital to its epartners1 fund and a further $250m to epartners2. The group will continue to manage its portfolio with a reduced staff, with Booth continuing to work with portfolio companies through to August; Bruce McWilliam, an executive director, will stay on to oversee the epartners 1 and 2 portfolios.

In a related move, SOFTBANK International Ventures announced the merger of its $500m SOFTBANK Europe Ventures fund and its $450m SOFTBANK UK Ventures fund into a $600m vehicle, which will retain the SOFTBANK Europe Ventures name. epartners was a limited partner in the UK fund and SOFTBANK has returned its $150m investment. Additionally, SOFTBANK and epartners joint eVentures India fund will no longer be investing in new companies, although provision has been made for appropriate follow-on investments. The additional reduction ($200m) of SOFTBANK’s European Ventures fund seems to indicate that it too is feeling the pinch. The group returned $100m of its funds to its limited partners and reduced its own commitment to the vehicle by $100m. The vehicle will continue to be managed out of the SOFTBANK International Ventures offices in London, Paris and Munich.

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