Larry Cheng on the Birth of Volition Capital
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make new investments out of the existing fund, on the same course that we have in the past. The limited partners in the existing fund are all still Fidelity entities. If we made a new investment in the near term, it would come out of that fund, until Volition Fund One is formalized. Then after that point in time, all of the new investments will be Volition-funded companies with Volition LPs. So we’re kind of in this bridge phase.
X: In your announcement yesterday, you said Volition’s focus will be on growth-equity investments in companies that already have $5 million to $50 million in revenues, and that don’t necessarily need more capital, but could do important things with it. How much of a change is that from the investing strategy at Fidelity Ventures?
LC: We had been increasingly focused on that segment for several years, and now it will be the principal focus of Volition Capital. There had been some other types of investments, such as seed stage investments, at Fidelity Ventures, just decreasing over time. We don’t think there is another firm that is specifically focused on that segment of the market, and we think it’s a very vibrant segment.
X: Volition also says it’s looking for companies where the founders still have a significant ownership stake in their company—20 percent or more. What’s the rationale behind that?
LC: I don’t think we’ve issued an exact number, but we would like the founders to have a significant stake. It testifies to their commitment and passion for the company. But it also signifies that the company probably hasn’t raised a lot of capital—and, by virtue of that, that the company probably hasn’t spent a lot of money either. In other words, we’re looking for large, very capital-efficient companies. For the most part, those companies won’t have a long list of institutional investors already invested in them.
X: Have you transplanted the entire Fidelity Ventures team to Volition Partners, or were there some additions or subtractions along the way?
LC: Dave Power [a former partner at Fidelity Ventures] decided not to join Volition. He will be starting a consulting firm to serve technology companies, but he will continue to collaborate with Volition as well. The only other nuance is Simon Clark [another former Fidelity Ventures partner], who ran the European team. He is staying internal at Fidelity and running a new fund for Fidelity called Fidelity Growth Partners, focused on European venture investing.
X: You mentioned a moment ago that Fidelity is still supportive of venture capital as an asset class, and you pointed to Fidelity Biosciences and the company’s venture funds in Europe and Asia. Is there a chance that Fidelity could get back into the technology venture investing business here in the United States, and create a fund that would wind up competing with Volition?
LC: They don’t have any current plans to rebuild the team and the office in Boston. They certainly have the option to do that, and they may or may not do that down the road. Whether we are competitors or not depends on the focus of that entity, if it were to become a reality.
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