JVP Fund Focuses on SANs

Jerusalem Venture Partners (JVP) has closed the largest fund in its history, worth $400 million (see JVP Closes $400M Fund).

The fund's investors include France Telecom SA, Infineon Technologies AG (NYSE/Frankfurt: IFX), Nortel Networks Corp. (NYSE/Toronto: NT), Reuters, Boeing, Columbia University, Massachusetts Institute of Technology, the government of Singapore, Jerusalem's Hebrew University, and Bank Leumi.

The fund will be used to invest in enterprise software, communications, and storage networking companies.

"Networked storage yields myriad advantages for data intensive enterprises and will be in big demand," says Adam R. Fisher, principal at JVP.

On the component side, JVP is interested in storage startups focusing on facilitating the migration to IP-based storage. "These are extremely attractive, as there are few established players in this market," Fisher says. On the systems front, he thinks the storage appliance segment is an "exciting new space" for high-end storage solutions. Software that can manage storage resources will clearly be in demand, too, and so will be a focus for the fund, he says.This new fund announcement underscores the fact that even though venture returns have been negative during the past several quarters, corporations and institutions still see big money over the long run from backing young companies (see VCs Wait for Liquidity).

"Corporate and institutional investors who are committed to private equity opportunities are continuing to be committed during these difficult times," says Erel Margalit, managing partner at JVP. "Newcomers and the fashionably interested may be putting their interest on hold."

JVP itself is a testament to the changing attitudes in the telecommunications, storage, and optical networking space. It was first founded to concentrate on seeding technology development in Israel but later expanded internationally in order to keep up with its portfolio companies.

"What we did was use our disadvantage -- seeding Israeli communications companies in a country with no strong domestic carriers -- to a competitive advantage by operating in the U.S. and in Europe," says Margalit.

Now the firm takes on the dual role of locally tending to investments while leveraging its international offices. Case in point: CyOptics Inc. was founded in the U.S. and seed-funded by JVP, but its research and development efforts weren't fully established until JVP recruited enough talent in Israel to support a fully operational indium phosphide wafer fabrication facility there (see CyOptics Claims Modulator Milestone).More recently, JVP has also been poking around in Asia, looking for business development opportunities on behalf of its portfolio companies. "Maybe in the next year or so we'll consider a direct investment or two," Margalit says.

The firm also announced Monday that it is sending JVP partner Glen Schwaber to head its Jerusalem office, while general partner Zeljka Matutinovic and senior associate Tal Lev, both in New York, will continue to work on optical and telecom deals.

And, while investment dollars continue to be poured into metropolitan area networks, Margalit says that JVP will be a bit contrary and think about what the next big core network technology will be. "A lot of people don't even want to go there because of the dominance of Cisco Systems Inc. [Nasdaq: CSCO] and Juniper Networks Inc. [Nasdaq: JNPR]," he says. "That area will come back in the next two years, so when you're building some of those systems companies now, you want to have disruptive technologies developed."

That contrarian approach has worked before. JVP funded Chromatis Networks before metropolitan DWDM technology was being widely used, and, though the company crumbled under Lucent Technologies Inc. (NYSE: LU), the acquisition paid off handsomely for JVP (see Lucent Catches Chromatis and Lucent Ditches Chromatis).

- Phil Harvey, Senior Editor, Light Reading
http://www.lightreading.comJo Maitland, Senior Editor, Byte and Switch
http://www.byteandswitch.com