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September 5, 2010

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Menlo Ventures Said to Be Seeking up to $800 Million for Fund

Sept. 3 (Bloomberg) — Menlo Ventures, the biggest investor in 3Par Inc., is raising capital for a new fund, said two people familiar with the matter. The firm is attempting to bring in $600 million to $800 million, one of the people said.

If it reaches $800 million, the fund would be the biggest started in the U.S. this year, surpassing Battery Ventures and Institutional Venture Partners, which each raised $750 million. Still, it would be smaller than Menlo’s last fund in 2005, which brought in $1.2 billion. U.S. venture fundraising tumbled 56 percent in the second quarter from a year earlier, according to the National Venture Capital Association.

While a slow IPO market is hurting returns at venture firms, Menlo stands to gain almost $220 million in the past three weeks from its investment in data-storage supplier 3Par. The firm owns 9.37 million 3Par shares, or 15 percent of the company. Hewlett-Packard Co. agreed to buy 3Par yesterday for $2.35 billion, or $33 a share, valuing Menlo’s total stake at about $309 million.

Jenny Saling, a spokeswoman for the Menlo Park, California– based firm, declined to comment. The company — located on Sand Hill Road, the center of venture capital investing in the U.S. — was started in 1976. The founders included H. DuBose Montgomery, who is still a managing director. In addition to 3Par, Menlo has invested in Hotmail Corp., F5 Networks Inc. and IronPort Systems Inc. Microsoft bought Hotmail in 1997, and Cisco Systems Inc. purchased IronPort in 2007.

Limited partners that have invested in past Menlo funds include the Washington State Investment Board, the Massachusetts Pension Reserves Investment Trust and HarbourVest Partners LLC.

To contact the reporter on this story: Ari Levy in San Francisco at alevy5

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