« Back

BA Venture Partners has become Scale Venture Partners, broadening its limited partner base beyond Bank of America Corp., previously its only source of capital.

Bank of America is now a minority investor in Scale's $400 million current fund, the Foster City, Calif.-based venture firm announced yesterday. Neither Scale nor the bank would disclose its new stake in the fund, which closed in 2005 and probably is about halfway committed. Scale Managing Director Kate Mitchell declined to name the new LPs, but said Scale has fewer than 10. She said they include funds of funds, direct investors and another financial institution.

The diversification of Scale's investor base is not complete. Bank of America has scheduled a second close on the sale of its investment in the fund for the end of this month, according to people familiar with the deal.

This is the second financial restructuring of a Bank of America affiliate. Last fall BA Capital Partners Europe split off to become Argan Capital. Bank of America, which had been the sole investor in the mid-market buyout firm, now holds a 20% stake, said Ted McCaffery, the bank's investment manager.

Both units were organized as independent investment firms and it made sense for them to bring in other investors as the bank seeks to take a more strategic approach to private equity, he said. Bank of America remains an investor in a number of private equity funds and makes occasional direct investments in emerging technologies.

When BA Venture Partners closed its current and seventh venture fund, the firm was able to obtain all the capital it required from its lone LP, but signaled that it would like to have a more diversified base of investors the next time out. Mitchell said discussions soon began about whether the firm should bring in other LPs sooner. "The bank was open to doing this, folks have been calling us," she said. "For us it's a real logical evolution."

McCaffery said the timing was right because many institutions want exposure to U.S. venture capital. "I think that's been proved out in that the market was pretty hospitable to this offering," he said.

The restructured fund is called Scale Venture Partners II. Mitchell declined to say how much of the $400 million remains to be deployed, but said that firm is on track to commit it over three-and-a-half to four years. Bank of America remains the sole limited partner in the firm's $500 million prior fund, now known as Scale Venture Partners I. Probitas Partners advised Scale and Bank of America.

Scale's strategy remains unchanged, Mitchell said. It is a multi-stage investor in health care and technology companies, but prefers ones that are taking a product to market, having largely completed development work. The firm has six managing directors.

« Back