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New Crystal Fund Sets Sights On $150M By Jeff Stacklin Crain's Cleveland Business October 20, 2003

Cleveland-based venture capitalist Crystal Internet Venture Funds LP has begun pitching previous and potential investors for a new fund totaling up to $150 million. The firm, based downtown in a Chester Avenue office, also will adopt a new name - either Crystal International Ventures or simply Crystal Ventures to reflect a shift in its investment strategy as it focuses on computer hardware or software companies in U.S. and Asian markets and de-emphasizes Internet startups, said managing director Daniel Kellogg. While the Internet led to several interesting business opportunities for Crystal's two previous funds, Mr. Kellogg said the new fund will be invested in companies either started in the United States and expanded into China, Singapore or Taiwan, or Asian companies that can expand into the United States. "We've licked our wounds from the Internet bubble,'' Mr. Kellogg said. "It turns out the Internet does make money ... (But) the Internet is now a tool causing globalization to accelerate.'' Mr. Kellogg said he expects about half the new fund to be invested in companies in Asia and half in U.S. companies. The venture firm has been the subject of much grousing by local entrepreneurs frustrated that it has invested in only two Northeast Ohio companies: EmployOn Inc., an online employment company in Euclid, and NetGenics Inc., a bioinformatics company formerly in Cleveland. Mr. Kellogg said the firm receives a limited number of business plans from local entrepreneurs, and most of them don't meet Crystal's investment criteria. "We invest where there are greatest opportunities for return for our investors,'' Mr. Kellogg said. "If that's in Cleveland, it would make my life so much easier. But if that's in Shanghai, that's where we'll invest.'' Mr. Kellogg spends most of his time in the United States, but he said his partners at Crystal spend more than six months of the year in Asia. The 10-employee firm also has offices in Palo Alto, Calif., and Singapore. In addition to Mr. Kellogg, whose background is in chemical engineering, the firm is headed by managing director Joseph Tzeng, whose background is in information technology and computer science. The firm will open the new fund for investments on Nov. 1, Mr. Kellogg said. It will total at least $80 million but most likely will reach $100 million to $120 million, he said. It will not exceed $150 million. The firm's first fund totaled $40 million and has been invested. Crystal's second fund, which totaled $200 million, has money left for investments. Some of that money will be redirected to the new fund, Mr. Kellogg said. Like Crystal's previous two funds, the money in the new fund most likely will come from investors in California and Asia, Mr. Kellogg said. Investors include corporations, investment banks and some individuals. "We have not yet taken money from U.S. pension funds,'' Mr. Kellogg said. "We do not know if we will consider that.'' Mr. Kellogg said he expects the fund will make its first investment in January or February, when it has its first closing. A final closing will occur later in 2004, he said.

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