International Data Group announces the launch of IDG Ventures Europe

Boston-based International Data Group (IDG), an IT media, research and exposition company, has announced the expansion of its private equity activities with the launch of IDG Ventures Europe (IDGVE). The new London-based vehicle has $100m available for investment across Western Europe in IT, particularly infrastructure, wireless, networking, content, service management and e-commerce enablers. Funding commitments will be made to early-stage companies that are raising their first institutional round of finance, with some pre-IPO investments also considered.

Although IDGVE’s funds originate solely from the parent corporation, the fund is structured as a limited partnership between the IDG and the fund manager, which takes the form of a limited company. The fund has a seven-year lifespan with a 2.5% annual management fee and a 20% carry, with commitments from the vehicle likely to range between $1m and $4m. Commenting on likely capital commitments from the fund, Kit Gould, managing partner of IDGVE, remarks: ‘The sweet spot for investment is $2m-$4m and we are unlikely to go beyond $8m’. In return for capital commitments from the vehicle an equity stake of between 10-30% will be sought. According to Gould, the fund will co-invest alongside other venture capitalists as either the lead or as a syndicate member, depending upon all the circumstances of the transaction. Additionally, Gould expresses the hope that IDGVE will move onto a second UK vehicle and look to launch funds in France and Germany in around three years time.

Unlike many corporate venturing initiatives, the fund has been established for financial return and is not primarily motivated by strategic considerations. According to Gould, this emphasis on financial return makes it ‘extremely unlikely’ that the fund will realise any of its investments through a trade sale to the parent corporation. On the question of whether the divestments would be made to competitors of the parent corporation, Gould remarks: ‘Absolutely. It is also possible to argue that we are currently investing alongside competitors of IDG’.

Currently, IDGVE is recruiting further associates and support staff. Gould reports that the vehicle is looking for professionals who have either an investment banking or an analyst background and must have an affinity with technology or a history in private equity. Gould also remarks that both pre- and post-MBA candidates will be considered.

IDG, an international IT publishing group with annual revenues of $3.1bn, began investing in private equity during 1992 with two funds established in China. According to official sources, IDG Ventures has invested in more than 85 companies, including Excite, F5 Networks, Infoseek, Netscape and Service Metrics. According to Kit Gould, US-based IDG Ventures I has returned 6.5 times the original investment, which represents an IRR of 332%. Additionally, Gould remarks that the two Chinese funds, which together total $200m, are starting to gain liquidity with some investee companies achieving flotation. Currently IDG has $580m under investment worldwide.

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