Venture fund not abandoning enterprise IT

Not all news on the enterprise IT venture capital front is bad after all.

Fairhaven Capital Partners of Cambridge, Mass., said Tuesday it has closed an oversubscribed $250 million fund that it will use to invest in enterprise and consumer technology companies along with those in high-performance materials and digital media infrastructure.

News of the fund stands in stark contrast to a flurry of recent negative reports on venture capital funding, including the latest MoneyTree Report that showed Q3 venture investing in network companies had hit a 10-year low. 

Paul Ciriello, managing director at Fairhaven, is secretive about what areas his team will target, but past investments have included companies such as Softricity, a desktop virtualization firm acquired by Microsoft, and EqualLogic, a storage company that almost went public before Dell bought it. Ciriello and colleagues had looked for companies that could help IT shops cut operations costs as well as enhance control over and centralize IT. More recent investments include Dataupia,  whose offerings help companies scale databases and data warehouses, and Fortisphere, a virtualization management start-up.

"We'll focus on opportunities, people, companies, ideas and technologies that focus on helping enterprises reduce the cost of their IT infrastructure further and get greater control over that infrastructure and sprawl," Ciriello says.

Ciriello says that while many IT shops have squeezed out lots of excess costs in recent years, "they still want to wring more out."

One area unlikely to get too much of Fairhaven's attention is wireless, Ciriello says. "So much money has been poured into mobile it's just difficult for us to find a place to invest."

Even though Fairhaven will continue to look for enterprise IT investment opportunities, Ciriello acknowledges that in times of scarce resources, experimentation with new companies and technologies doesn't happen as much as during good times. 

The Fairhaven team launched its first fund, totaling $160 million, while part of TD Capital back in 2001. It made 20 investments and had an average exit time of 3.5 years, less than half the industry average, Ciriello says. As for the current fund, Fairhaven has made five investments (four last year, one this year) and expects to make as many as 25 deals over the next few years.