General Catalyst Seeks to Raise $650 Million for Tech Fund

General Catalyst Partners, the venture-capital firm co-founded by Joel Cutler, is seeking to raise $650 million for a new fund that will invest in technology companies.

The firm, based in Cambridge, Massachusetts, is targeting about $450 million for its General Catalyst Group VI LP fund, which will focus on consumer Internet, social media and technology businesses, according to marketing materials sent to investors in October and reviewed by Bloomberg News. It is also attempting to gather about $200 million for a supplemental vehicle that will invest in larger deals with the main fund, according to the marketing document.

General Catalyst, which also has offices in Palo Alto, California, is trying to raise money following the slowest quarter for venture-capital fundraising in eight years. Venture firms collected $1.72 billion in the third quarter, down 53 percent from the same period a year earlier, according to the National Venture Capital Association.

“Since July, when publicly traded market volatility increased dramatically, venture-capital fundraising has been quite slow, as it has been in all areas of private equity,” said Kelly DePonte, a partner at Probitas Partners LLC in San Francisco, which raises money for alternative-investment firms.

General Catalyst expects a December close for the fund, according to two prospective investors who asked not to be identified because the information is private. Its previous fund and supplemental vehicle collected about $722 million in 2007.

Targeting Software, IT

Michelle Daubar, a spokeswoman for the firm, didn’t return phone calls or e-mails seeking comment on the fundraising.

In addition to consumer Internet and new-media companies, the latest fund will target software and information technology firms, as well as companies “that create fundamentally new breakthrough-oriented ways” of doing business, according to the document. General Catalyst could increase the amount on both the main and supplemental funds by 10 percent each.

Since its founding in 1999, the firm has raised five funds and invested about $1.2 billion in 143 companies and start-ups, according to the document. They include ProfitLogic Inc., which was sold to Oracle Corp. in 2005; UPromise Inc., later sold to Sallie Mae; SiteAdvisor Inc., which was sold to McAfee Inc. in 2006; and GroupMe Inc., which was bought by Skype Technologies SA in August.

While General Catalyst lacks a stable of hot social-media companies such as Twitter Inc., Zynga Inc. and Facebook Inc. to help boost fundraising, investors point to Kayak Software Corp., the online travel website, as one of the firm’s more promising holdings.

Kayak Investment

Kayak, which first registered for an initial public offering in November 2010, was generating a 41 percent gross internal rate of return and 5.65 times multiple for Fund III as of Sept. 30, according to the marketing document.

General Catalyst first invested in Norwalk, Connecticut-based Kayak from its third fund in 2004, with additional investments from its fifth fund and supplemental vehicle in December 2007. The firm said in its marketing document that it’s weighing market conditions before taking Kayak public.

“While the company is actively in the registration period, it is assessing current market conditions before it proceeds with its offering,” according to the document.

General Catalyst has investments in several other companies that have filed for IPOs, according to the document. They include Brightcove Inc., an online video-management company; Demandware Inc., an e-commerce platform; and Mascoma Corp., a biofuels producer.

(Adds GroupMe Inc. sale in eighth paragraph.)
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