Idealab Capital: a Change of Name, Place, and Pace

April 17, 2001
© 2001 VentureWire
By Amanda Briggs

Idealab Capital Partners has a new name and plans to open new offices in Los Angeles and Silicon Valley, according to managing directors Bill Elkus and Erik Lassila. The offices, along with the pleasantly incubator-free name Clearstone Venture Partners, are part of the firm’s strategy to survive an investment climate increasingly wary of venture investors who made their fortune the height of the dot-com boom.

Founded in 1998 in Pasadena, Calif., the firm is searching for a new home in Los Angeles, although in the meantime it continues to share office space with Bill Gross’s beleaguered incubator idealab!. Mr. Elkus, who expects to settle on a new space shortly, said he plans to add to the team of eight in the firm’s Los Angeles office. The firm has already announced one of its new venture partner hires, Leonid Kazovsky, a professor of electrical engineering at Stanford and head of the university’s optical communication research laboratory.

Mr. Lassila will oversee the firm’s expansion in Silicon Valley. According to Mr. Lassila, the firm has already settled on a space on Sand Hill Road and plans to add another partner to its team of four by the end of the year. The new partner will focus on early-stage deals in software and communications.

News of the firm’s new name and location were preceded by Clearstone Venture Partners’ decision to forgo raising its third fund, with a target of $500 million. Mr. Elkus said the decision, which was reached last month, was due to the firm’s slower investment pace. Asked if the fund-raising was cancelled due to lack of interest on part of investors, Mr. Elkus said the firm nixed the idea before many of its potential investors had a chance to respond to the offer.

According to Mr. Lassila, the decision was also influenced by the fact that many of the companies in the firm’s portfolio will not require as much follow-on financing as originally planned because they’ve reduced their burn rates. In recent months several of the firm’s portfolio companies have announced layoffs, including San Mateo, Calif.-based Zelerate, a provider of open source e-commerce business applications, and of Irving, Texas, an online career recruitment and information resource, which filed for Chapter 11 bankruptcy protection.

Mr. Elkus stresses that the firm continues to support all of its companies, but wouldn’t disclose how much of the $200 million left from its second fund is earmarked for follow-on financing. “That number changes week to week,” he said.

He said the firm still has enough to make at least eight to 12 new investments. Mr. Lassila expects the remaining capital to carry the fund through 2002.

The firm has just closed deals with Neomar, a wireless software company, SummitLogic, an enterprise application provider, and Zyoptics, a wireless optical networking company.

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