At a time when VC exits are few and far between, new-kid-on-the-block Claremont Creek Ventures has recorded its first liquidity event this fall.
Claremont portfolio company PropertyBridge, which provides electronic payment services to the real estate management industry, was acquired during October by MoneyGram International (NYSE: MGI). The sale price wasn’t disclosed, but Claremont says it made 5x its investment, with the potential for 7x if performance benchmarks are met.
PropertyBridge was the first investment for Claremont, which formed in 2005. It led the company’s $2 million Series A in early 2006, with participation from two angel investors in Keiretsu Forum.
Claremont is among a handful of funds started in the past couple of years that have approached VC a little differently. For example, it is located in the industrial city of Oakland, Calif., where it looks for deals off the beaten path. And as many VCs are pursuing later stage deals, Claremont focuses on the very early stage, where it can stretch a small amount of capital with a lot of sweat equity.
I asked Managing Director John Steuart, who led the PropertyBridge deal, five questions:
Q: Does the PropertyBridge exit validate your investment strategy?
A: Absolutely. Because this was a company that went through our Life Cycle Venturing process, it comes out of the East Bay, our backyard, and it demonstrates that small amounts of capital can generate large IRRs. You could argue that we just go lucky, but I think many will say, ‘Hey, these guys are onto something.’
Q: What do you mean by Life Cycle Venturing?
A: We were heavily operationally involved in the company. It got better not just because of our money but because of our help. A lot of times, that’s what entrepreneurs need. I went to trade shows with them, many of their meetings, got involved in their first lease and helped them think through their strategy.
Q: Some say the venture model is broken. What’s your take?
A: Venture is a very big, heterogeneous, motley marketplace. I think there are terrific opportunities in venture; you just have to have the right strategy. For example, you can make five to 10 times your money on sub-$100 million acquisitions. There are lots of acquisitions in the $50 million to $100 million space, but by conventional venture yardsticks, those are not home runs.
Q. Where are you at with your $130 million first fund?
A. With reserves, we are about halfway there. We’ve done 11 deals so far—two of them in stealth. We did a very cool one with Sequoia that’s in stealth.
Q: How does the rest of your portfolio look in terms of exits?
A: All of our companies are in a place where they are doing well. I don’t see another exit this year. If we do get another one it would be like this [with PropertyBridge], where a competitor was hot and bothered and willing to pay a price that was compelling to all the participants.