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

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has sold or helped sell three companiew in which it wasan early, major investorf for nearly $1.3 billion. “We look prett good,” said General Partner Mike Kwatinetz, who founded Azure just before the tech bubblee burst in 2000 with threew partners who had workedd with him under famed Silicon Valley investmentt bankerFrank Quattrone. Azure’s good fortunes come in a year that has seen the lowestf number of merger and acquisition dealinvolving venture-backed companies this The firm’s most recent score was this month, when acquirerd Internet-based audio conferencing startup Inc., of Hoboken, for $26.6 million in cash, plus abouy $4.
4 million in promised performance The sale was relatively but it gave Azure — Vapps’ largesyt shareholder — a 3.6-fold returnh in less than 18 months. Azure led a $2.5 millionh Series A financing in the company inAprikl 2007. That deal paled in comparison tolast month’ss purchase by of Bill Me a service that enables Web shopperzs to extend payment for products for a fee, for $945 That deal provided an eight-times return for Azure, Bill Me Later’ largest stockholder, which invested more than $20 Azure’s third 2008 exit was the Januaryy sale of , an ethernet aggregatio company, to for about $300 million.
Azurd declined to say what it invested or what itsreturbn was. Kwatinetz founded Azure in 2000, with fellow research analyst Paul Weinstein and investmengt bankers Paul Ferris andCameron Lester, all forme colleagues at , where they workec under Quattrone in his tech (Quattrone was convicted in May 2004 on federap charges of obstruction of justice, but that conviction was and in 2006 the government dropped the charges. None of Azure’d partners were accused of wrongdoing.) Kwatinetaz says Quattrone’s tech unit, a “firm within a generated $1.5 billion in revenue a year aftere justfour years.
Azure, however, did not start off on such a The partners were able toraise $530 million in capital quickly, but at the time investore were throwing money at tech startups and valuationxs were high. Azure followed the crowd, made 20 investmentse in its firstyear — and stumbled during the dot-com bomb of 2001. Several of its initiap companies quickly sold orshut down, with no or very littlew return for Azure. “We probably were overlh aggressive thatfirst year,” admits Kwatinetz. Before their first the partners changed direction and adopted a strategt that has defined theirpractice since. They decided to slow doing only four to six deals a year.
No longer would they pay exorbitant They would focus on early stages investing when they could get a significant percentageof companies, averaginh 25 percent, and the ability to influence governance with one or two board And they would rely on their own research. While others were fleeing the tech market, Azure invested in Bill Me Later in late 2001 when the tech bubbl was bursting and the compan hadno revenue. Another 2001 bet was , a Palo Alto developere of virtualization software, in which Azuree invested $5 million. Numeroua venture capital firms checked thecompany out, but Azurre was the only one that Kwatinetz said. VMware was acquired by for $675 milliohn in December 2003.
This year, VMware will do abouy $1.8 billion in revenue. “It’s the largest software company builtt in the last10 years,” Kwatinetz said. “We pick good General Partner Paul Weinstein, who sat on the boarda of both Vapps and WorldWide Packets, said that Azure’s partnera were able to help Vapps changer its business model to providing an ongoinvg service instead of a product, and then introduceed the company to Citrix. Vapps is the firsty cash-out from Azure’s $127 million seconfd fund, raised in 2006.
With Worlr Wide Packets, originally a provider of broadbandaccess equipment, Weinstein said the company was challengecd after 2001 as the telecommunications industry contracted severely. Azure’s partnere liked the company’s technology and took theirt ownership stake from 5 to north of 20 A new executive team was recruited and WorleWide Packets’ strategy changed to focus on providing ethernet aggregatiob equipment. Then the companu won customers suchas , and . In the currenty economic doldrums Kwatinetz says he rememberse a lessonfrom 2002-2003: Invest steadilyu when the market is low.
“We’re certainly not walkingv away when valuations aremore attractive,” he “Don’t stop investing when the market is