New IDG Capital Fund Thinking Big, Thinking Global

No press release. No fanfare. Just Pat McGovern talking to VentureWire. And so, the existence of IDG Capital was brought to public attention yesterday.

The IDG chairman is forming the new organization to centralize a large portion of his far-flung venture operations. And he’s beginning with the goal of raising $1 billion, as the fund prepares to invest in ventures in emerging markets worldwide.

As news of the organization emerged, we caught up yesterday with Steve Kahn, the veteran venture capitalist McGovern has tapped as managing partner of IDG Capital, which will operate out of One Exeter Plaza in Boston, home to IDG’s corporate headquarters. Notably, Kahn said the new body had little, if anything, to do with last month’s splitting-off of IDG’s Boston venture arm to form Flybridge Capital Partners. Rather, he says, it reflects an effort to be more efficient and centralized about the way IDG raises and manages investment funds as its venture activities spread to more nations abroad.

Kahn has had some experience with big funds that operate in international waters. In 2005, he left Advent International, the large private equity firm with U.S. operations in Boston and other offices in Europe, South America, and Asia, after some 17 years with the company. He says he departed as the firm evolved away from venture investing and became a buyout specialist. He spent much of the next two years at Prevail Capital, a boutique placement agency that he co-founded with a colleague at the end of 2005; Kahn worked out of his Bedford, MA, home while his partner worked in Palo Alto. After being approached by a headhunter last year, Kahn signed on with IDG Capital in mid-February.

With its Boston affiliate now operating separately, IDG has five remaining venture arms, in San Francisco, China, Korea, India, and Vietnam. (Only three of these will be funded through IDG Capital—more on that below.) Each of these funds is typically kicked off with sole funding from IDG, but operates independently. If a new fund is raised, IDG usually puts in a percentage but leaves it to each operation to raise the rest. Under the new organization, though, a central fund will be raised under Kahn’s auspices, with the money then available to the participating local arms for investment. The idea, says Kahn, is to free the partners in each local office from the fundraising aspect of their jobs so they can concentrate on investing. “The objective of the group is to provide funding and oversight for the venture network that IDG has developed,” he says.

That funding won’t be insubstantial. “I think our target is around a billion dollars,” Kahn says, noting the aim is to complete the raise by year’s end. IDG, as has been McGovern’s practice, will play a big role in getting it started. “In general he’s up for putting in between 15 and 25 percent of what we end up raising,” Kahn says. He calls that “the sweet spot” … Next Page »

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