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Crystal Raising $150M New Fund By Carolina Braunschweig Private Equity Week October 20, 2003

Joseph Tzeng and his partners at Crystal Ventures have kicked off a $150 million fund-raising drive for a new fund focused on startups in Asia. The Cleveland-based firm has filled the portfolios of its previous funds mostly with early-stage deals. But with the launch of CIVF III, Crystal Ventures plans to shy away from that strategy. Although one-third of its new fund is allocated toward early and development- stage investments requiring up to $5 million, Crystal Ventures has earmarked the remainder for relaunching and restarting later-stage companies with as much a $10 to $20 million. "It's not about doing down rounds or washouts," Tzeng explains. "It's about restarting, reengineering and relaunching companies with new inside and outside investors, getting rid of negative conditions like liquidation preferences, rebuilding the team and motivating management with new options pools." At the same time, the firm is most interested in startups tackling Asian markets. Up to 40% of the fund's capital will be invested directly in Asia, in startups from Hong Kong, Taiwan and Singapore to Mainland China. The remainder will go to North American companies planning to do business across the Pacific. It's an investment strategy that has paid off for Crystal Ventures in the past. LGC Wireless of San Jose, Calif., for example, entered the Asian market two years ago after five years in business. Now, a large percentage of its $25 million annual revenue comes from sales in China and Korea, Tzeng says. Crystal Ventures' new fund will invest in enabling technologies and applications in broadband and wireless. It also plans to finance enterprise software developers and content providers for Internet and wireless technology. The six-year old firm, once known as Crystal Internet Ventures, is managed by Tzeng, Daniel Kellogg and the newly appointed Henry Wong through its offices in Cleveland, Palo Alto, Calif., Singapore and Taiwan. The team plans to hold a first close on the fund by the first quarter of 2004 and make a final close by the end of the second quarter. The firm will not disclose the names of its limited partners, but Tzeng says that up to 70% of its investors will come from Asia.

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