TCRS makes $25MM private-equity commitment

By Milt Capps

Published November 19, 2009

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Tim Draper DFJ Founder

The Tennessee Consolidated Retirement System has made a $25 million private-equity investment commitment to Draper Fisher Jurvetson Fund X, LP.

The announcement brings to $175 million TCRS assets recently committed to private-equity investments, which were not allowed under state law, until this year.

With TCRS assets currently totaling nearly $29 billion, TCRS guidelines would allow maintaining nearly $300 million in private-equity investment, but that limit is not expected to be reached in this, the PE program's first year of operation. TCRS Private Equity Director Lamar Villere (at left) told VNC yesterday that further allocations may be announced prior to Dec. 31. The allocations are approved by the TCRS board of trustees and its investment committee.

An analysis published earlier this year by TechCrunch showed DFJ as No. 1 of the nation's top 100 venture capital funds, when measured by the frequency of their co-investments with other funds and related factors.

The targeted $400 million DFJ Fund X is based in Menlo Park, Calif. DFJ and the DFJ Global Network it controls have direct access to venture funds in at least 30 cities, globally, including Bangalore, India, where observers report a booming tech startup sector that needs access to U.S. telecomputing infrastructure, as well as U.S. capital.

DFJ's website said that since DFJ was founded 24 years ago, the company has backed more than 600 ventures, including Hotmail, Skype, TicketsNow (acquired by TicketMaster), with a number of its exits representing sales to Yahoo!, Google and other heavyhitters. Just two years ago, DFJ completed a $600 million raise for its Fund IX.

A genuine "thought leader," DFJ Founder Tim Draper is widely credited with being the first innovator to urge use of "viral marketing" to accelerate product introductions, and he is an advocate of youth education initiatives, globally.

Yesterday, Draper told the San Jose Mercury News that this week's NASDAQ debut of Sunnyvale-based Internet security player Fortinet is further indication the IPO market is "starting to open up," and "Overall, it looks good for the venture capital business," notwithstanding the drag he said post-Enron regulations pose for companies with smaller valuations.

In August, TCRS announced allocations to three other prominent firms totaling $150 million. The firms: Hellman & Friedman Capital Partners VII; TA XI; and, Khosla Ventures III, the latter also of Menlo Park.

Villere said TCRS' long-standing general consultant, Strategic Investment Solutions (San Francisco), represented TCRS in the process of making the four commitments.

TCRS received legislative approval to invest in private equity in 2008, announced Villere's appointment in January and produced the state's first guidelines for private-equity investments in June, this year.

Beyond Villere's PE operation, the TCRS has at least 16 advisors and management firms under contract. ♦