HarbourVest secondary team backs €177m VC spin-out

HarbourVest Partners has partnered equally with German publishing group Verlagsgruppe Georg von Holtzbrinck to spin out the latter’s 12-year-old captive venture arm, Holtzbrinck Ventures.

As part of the transaction the newly independent firm has closed Fund IV on €177 million, roughly 70 percent to 75 percent of which was seeded with existing assets, balanced out by fresh capital for follow-on and new investments. Existing assets comprise some 48 new media portfolio companies, including e-commerce sites Groupon, Zalando and dating site eDarling.

“This was one of the largest stapled deals since the credit crisis,” said Andrew Sealey, managing partner of placement and advisory firm Campbell Lutyens, which advised Holtzbrinck. “We’ve used the existing portfolio as the building block for this new fund. These [deals] used to be pretty common, but since the credit crisis they’ve been pretty difficult to get away.” Immanuel Rubin, senior vice president on Campbell Lutyen’s secondaries-focused team, helped lead the advisory work.

Peter Wilson, head of HarbourVest’s European secondaries activities, said HarbourVest had initially come into contact with the Holtzbrinck Ventures team in 2005. Martin Weber, partner at Holtzbrinck Ventures, got back in touch in October 2009 to talk about a potential spin-out. “Following the contact from Martin – he called us because we’d had a good experience back in ’05, although nothing had progressed at that point – we were able to update on the portfolio and saw that things had progressed nicely both in terms of cash-on-cash as well as a number of compelling investments they’d made since we had looked at them in-depth in ’05.”

HarbourVest had also become increasingly interested in the digital media sector in recent years. In 2009, he said, “We were successful in spinning out the Lehman late-stage VC team out of the US, now Tenaya Capital, so it was an area where we had some expertise and institutional interest.  And if you look at the portfolio that the Holtzbrinck Ventures team have built up – we felt they pretty much own the digital media/consumer internet space in Germany.”

Finally, he said, HarbourVest was attracted to the deal because Holtzbrinck Ventures’ senior professionals had been working together for more than a decade.

“We’re optimistic about this opportunity,” Wilson said. “There are a number of very interesting companies in the portfolio, we could well see early liquidity… So it’s going to be one to watch this year and into next year.”

Last month, Holtzbrinck Ventures exited its holdings in German online shopping club brands4friends, which eBay purchased for roughly €150 million.

HarbourVest’s secondaries team is not exclusively focused on venture or new media assets, Wilson noted.  “We have also done a deal quite recently that involves spinning out a team that has built a later stage life sciences portfolio,  as well as a large buyout portfolio, so it’s not just a digital media focus for us,” he said. “If other deal factors work, we’ll do the work to get it across the line.”

HarbourVest made the investment from its latest secondaries fund, Dover Street VII, which closed on $2.9 billion in April 2009. Wilson declined to comment on fundraising plans for an eighth fund, but the firm is widely expected to market a vehicle soon.