Oregon Venture Capital Fund of Funds Excites Investors – Credit Suisse First Boston, chosen to run the $100 million program, is expected to add clout and expertise

Oregon Treasurer Randall Edwards isn’t prone to hyperbole, so he doesn’t call the state’s new $100 million venture capital fund the biggest event in Oregon venture investment history — although it may be.

By:
Mike Francis
Oregonian

http://www.nasvf.org/web/allpress.nsf/pages/8383

Instead Edwards, who visited Thursday’s Angel Oregon conference and was buried with business cards from hopeful entrepreneurs and investors, likens its effect to dropping "a big rock in a fairly small pond."

And young Oregon companies in the pre-profit stage, which historically has been starved for investment capital, should benefit from the waves it generates.

Managers of Credit Suisse First Boston, which was hired last week to manage the state’s new "fund of funds," say they expect to begin placing money with venture firms by summertime. The financial giant says it expects to open a permanent office in Oregon within two months.

The new fund will place about 80 percent of its money with other investment firms, probably including some already in the region, said Michael Arpey, the Credit Suisse executive who has been working with Oregon Treasury officials. The fund also can invest directly in young companies that fit its criteria.

Starving for lack of capital The launch of a new $100 million fund would not be huge news in Silicon Valley or New York. But it’s a seismic event in Portland, where entrepreneurs frequently complain they can’t assemble the money they need to turn promising private companies into flourishing larger companies.

For every Portland-area company like GemStone Systems or Pixelworks that has raised money and grown its business, there are many others that have starved for lack of capital or have been relocated to other cities, closer to out-of-town investors.

Oregon backers of the bill that created the fund, including technology executives Scott Gibson and Keith Barnes, say it fills a crucial niche in the financial landscape.

"It really gives a lot of credibility to the state," said Gibson, chairman of RadiSys and a cofounder of Sequent Computer Systems.

He said it "speaks volumes" that the blue chip firm Credit Suisse is investing some of its own money and its partners’ time and opening an office in Oregon to distribute $100 million or more to funds emphasizing Oregon investments.

The Oregon Investment Council, which oversees the $43 billion Oregon Public Employees Retirement Fund, last week chose Credit Suisse to manage the venture fund.

"They believe and we believe that there are deals here," Edwards said.

Arpey of Credit Suisse said the fund’s managers will reach out to universities and corporations in an effort to deepen the fund, which can add as much as $50 million in investment capital in addition to the pension fund’s allocation of $100 million.

Credit Suisse brings clout It’s important "because we get asked by our other limited partners, ‘What’s Oregon doing?’ " said Wayne Embree, a principal in Beaverton’s Cascadia Partners, an investment firm that focuses on newer companies. He said it intends to seek money from the new fund.

But in the past, it’s been difficult for Cascadia and other firms to assemble sufficient investment capital from the region. Nevertheless, he said, "we continue to believe that there are great opportunities here."

Edwards said the state considered choosing fund managers based in the region but ultimately picked Credit Suisse because of its experience and far-flung network of investors and vendors. Bringing the firm’s presence to Oregon, he said, "adds diversity to the pool here."

Further, said Arpey, the new fund is likely to attract other investment firms to the region.

"We have to have a strong core of local groups with a sprinkling of national groups," he said. "We’ve got to give our portfolio companies a reason to be in Oregon."