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April 27, 2004

Garnett & Helfrich Starts $250 Million ‘Venture Buyout’ Fund

By Hui-yong Yu

Garnett & Helfrich Capital, formed by former executives at Venrock Associates and ComVentures, said it raised a $250 million buyout fund that will purchase stakes in software and communications companies.

Harvard Management Co. is the fund’s largest investor, followed by Stanford Management Co. Other backers include HarbourVest Partners LLC, the University of Michigan, Columbia University and Silicon Valley Bank.

Garnett & Helfrich will try to buy from publicly traded companies laggard divisions that have annual revenue of as much as $100 million and install new management, said Terry Garnett and David Helfrich, the 47-year-old co-founders and managing directors of the Redwood City, California-based firm. Garnett & Helfrich aims to make eight to 10 investments and the principals plan to join the boards of companies the fund acquires.

Potential targets are units “no longer deemed to be strategic inside the parent company,” Helfrich said in an interview.

The strategy is similar to that of Silver Lake Partners, a technology buyout firm that just raised $3.6 billion for its second fund.

Garnett and Helfrich will hire new managers and take an active role in trying to increase sales, much as a venture capitalist would. Like buyout fund managers, they’ll invest in existing companies, with at least $20 million in sales, rather than a business plan.

New Category

“Garnett & Helfrich Capital can be built into a franchise fund addressing a newly emerging investment category,” Peter Dolan, director of private equity for Harvard, said in a statement.

In 2002, Venrock and other firms bought an encryption software business from Network Associates Inc. to form PGP Corp., said Garnett, a former marketing and business development executive at Oracle Corp. From 1995 to 2003, Garnett was at Venrock, the venture capital arm of the Rockefeller family. He led investments in Siebel Systems Inc., Checkpoint Systems Inc. and Neon Systems Inc.

Helfrich helped start ComVentures, where he spearheaded investments in CoSine Communications Inc. and closely held Entera Inc. Before his six years as a venture capitalist, Helfrich helped found and build companies including Newbridge Networks Corp. and Ascend Communications Inc.