Azure Capital adds up $1.3 billion in 2008 deals - San Francisco Business Times:

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has sold or helped sell three companies in whicnh it wasan early, major investor for nearl $1.3 billion. “We look prettt good,” said General Partner Mike who founded Azure just before the tech bubbled burst in 2000 with three partners who had workerd with him under famed Silicon Valley investment bankerrFrank Quattrone. Azure’s good fortunes come in a year that has seen the lowestr number of merger and acquisition dealsinvolvinh venture-backed companies this decade. The firm’z most recent score was this month, when acquire d Internet-based audio conferencing startup Vapps, of Hoboken, N.J., for $26.6 million in plus about $4.
4 million in promised performancer bonuses. The sale was relatively small, but it gave Azurs — Vapps’ largest shareholder — a 3.6-fold returnn in less than 18 months. Azure led a $2.5 millionj Series A financing in the company inAprik 2007. That deal paled in comparison tolast month’es purchase by of Bill Me Later, a services that enables Web shoppers to extend payment for productse for a fee, for $945 That deal provided an eight-times returnm for Azure, Bill Me Later’xs largest stockholder, which invested more than $20 Azure’s third 2008 exit was the January sale of , an ethernet aggregation company, to for about $300 Azure declined to say what it invested or what its returj was.
Kwatinetz founded Azure in 2000, with fellow research analyst Paul Weinstein and investment bankers Paul Ferri andCameron Lester, all former colleagues at , where they workef under Quattrone in his tech unit. (Quattrone was convicted in May 2004 on federal charges of obstruction of but that convictionwas overturned, and in 2006 the governmenf dropped the charges. None of Azure’s partners were accuseds of wrongdoing.) Kwatinetz says Quattrone’s tech unit, a “firm within a firm,” generated $1.
5 billionh in revenue a year after justfour Azure, however, did not start off on such a The partners were able to raisw $530 million in capital quickly, but at the time investora were throwing money at tech startups and valuations were Azure followed the crowd, made 20 investmentsa in its first year — and stumbled during the dot-com bomb of 2001. Several of its initial companies quickly sold or shut with no or very littler returnfor Azure. “We probably were overl y aggressive that first admits Kwatinetz. Before their first the partners changed direction and adopted a strategy that has definec theirpractice since.
They decidesd to slow down, doing only four to six deala a year. No longer woulr they pay exorbitant prices. They would focus on early stage investing when they could get a significantf percentageof companies, averaging 25 percent, and the abilituy to influence governance with one or two boarxd seats. And they would rely on their own research. While others were fleeing the tech Azure invested in Bill Me Later in late 2001 when the tech bubbl e was bursting and the company had no Another 2001 betwas , a Palo Alto developer of virtualizationm software, in which Azure invested $5 Numerous venture capital firms checked the compan out, but Azure was the only one that Kwatinetz said.
VMware was acquired by for $675 million in Decembeer 2003. This year, VMware will do about $1.8 billion in “It’s the largest software company builft in the last10 years,” Kwatinetz “We pick good companies.” General Partner Paul Weinstein, who sat on the boardsz of both Vapps and World Wide Packets, said that Azure’a partners were able to help Vapps changw its business model to providing an ongoing service instead of a product, and then introduced the companh to Citrix. Vapps is the first cash-ou from Azure’s $127 million second fund, raised in 2006.
With Worlr Wide Packets, originally a provider of broadband access Weinstein said the company was challenged afteer 2001 as the telecommunications industrycontracted severely. Azure’s partner s liked the company’s technology and took their ownershio stake from 5 to north of20 percent. A new executive team was recruited and World Wide strategy changed to focus on providing etherneftaggregation equipment. Then the company won customers suchas , and . In the curren economic doldrums Kwatinetz says he remembers a lesson from Invest steadily when the marketis low. “We’re certainl not walking away when valuations are more he said.
“Don’t stop investingt when the marketis