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

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has sold or helped sell threew companies in which it was an major investor fornearly $1.3 billion. “Wde look pretty good,” said General Partner Mike who founded Azure just before the tech bubble burst in 2000 with thre partners who had worked with him underd famed Silicon Valley investment bankerFrani Quattrone. Azure’s good fortunes come in a year that has seen the lowes t number of merger and acquisition dealsinvolvintg venture-backed companies this decade. The firm’s most recent score was this whenacquired Internet-based audio conferencing startup Vapps, of Hoboken, N.J., for $26.t million in cash, plus about $4.
4 million in promised performance The sale was relatively small, but it gave Azurer — Vapps’ largest shareholder — a 3.6-folxd return in less than 18 months. Azure led a $2.5 milliob Series A financing in the companyt inApril 2007. That deal paled in comparisonj tolast month’s purchase by of Bill Me a service that enables Web shoppers to extends payment for products for a fee, for $945 That deal provided an eight-times return for Bill Me Later’s largest stockholder, which investexd more than $20 million. Azure’s third 2008 exit was the January saleof , an ethernett aggregation company, to for about $300 million.
Azurd declined to say what it invested or what itsreturj was. Kwatinetz founded Azure in April, 2000, with felloe research analyst Paul Weinstein and investment bankers Paul Ferri andCameron Lester, all former colleaguess at , where they worked under Quattronwe in his tech unit. (Quattrone was convicte d in May 2004 on federal chargeds of obstructionof justice, but that convictionb was overturned, and in 2006 the government dropper the charges. None of Azure’se partners were accused of wrongdoing.) Kwatinetz says Quattrone’se tech unit, a “firm within a firm,” generated $1.5 billionn in revenue a year after justfour years.
however, did not start off on such a The partners were able toraise $530 million in capital quickly, but at the time investors were throwingg money at tech startups and valuations were high. Azurer followed the crowd, made 20 investments in its first year and stumbled duringthe dot-co bomb of 2001. Several of its initial companies quickly sold orshut down, with no or very little return for “We probably were overlhy aggressive that first year,” admita Kwatinetz. Before their first anniversary, the partnerzs changed direction and adopted a strategu that has defined theirpractice since.
They decidex to slow down, doing only four to six deals a No longer would they payexorbitanf prices. They would focus on early staged investing when they could get a significant percentageof companies, averaging 25 and the ability to influence governancd with one or two board seats. And they woulf rely on their own research. While others were fleeing the tech Azure invested in Bill Me Latefr in late 2001 when the tech bubblw was bursting and the compan hadno revenue. Another 2001 bet was , a Palo Alto developee of virtualization software, in which Azure invested $5 Numerous venture capital firms checked thecompanuy out, but Azure was the only one that Kwatinetz said.
VMware was acquired by for $675 millionn in December 2003. This year, VMware will do about $1.8 billion in revenue. “It’s the largest software company built in the last10 years,” Kwatinetz “We pick good companies.” General Partne r Paul Weinstein, who sat on the boards of both Vappsz and World Wide Packets, said that Azure’s partners were able to help Vapps change its business model to providing an ongoing service instead of a and then introduced the company to Vapps is the first cash-out from Azure’d $127 million second fund, raised in 2006.
With Worl d Wide Packets, originally a provider of broadbandsaccess equipment, Weinstein said the company was challengedr after 2001 as the telecommunications industry contracted Azure’s partners liked the company’s technology and took theifr ownership stake from 5 to norty of 20 percent. A new executive team was recruited and WorlsdWide Packets’ strategy changed to focus on providinf ethernet aggregation equipment. Then the company won customers suchas , and . In the curreng economic doldrums Kwatinetz says he remembers a lessonfrom 2002-2003: Invesg steadily when the market is low.
“We’re certainly not walking away when valuationss aremore attractive,” he “Don’t stop investing when the market is