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Novak Biddle Venture Partners raising sixth fund

06/22/2012

Bethesda-based Novak Biddle Venture Partners is setting out to raise its sixth fund, said co-founder Jack Biddle, its first such effort since the early-stage venture firm raised $227 million six years ago.

That fund will be accompanied by some big changes at the top. Two general partners, Phil Bronner and Tom Scholl, will take on reduced roles as venture partners in the next fund, according to Biddle. Bronner and Scholl, both tech brains with entrepreneurial backgrounds, were promoted to their current positions when the firm closed its fifth fund in 2006.

The change will allow Bronner to focus full time on his new role as startup CEO. In recent months, he has been quietly building an educational-tech company called American Honors, which raised more than $3 million in the first quarter from Reston-based New Atlantic Ventures Chevy Chase-based New Enterprise Associates Inc., Biddle and his co-founder, Roger Novak, among other investors. Bronner, who declined to comment on the startup, has partnered with entrepreneur and former Colorado state Sen. Chris Romer to lead the venture.

Biddle declined to say how much the firm hopes to raise. But the fresh fundraising attempt will be a big test for Novak Biddle, which has mostly sat out the social media and consumer Web boom that is now yielding big returns for early investors in companies like Facebook Inc., Groupon Inc. and LinkedIn Corp.  Novak Biddle’s bread and butter has been enterprise technology, with an especially keen focus on education tech.

The firm closed its fifth fund in weeks, buoyed by the 2004 initial public offering of D.C.’s Blackboard Inc., among other exits.

Partners in recent weeks have begun talking to prospective investors in the sixth fund. This go-around, the process is likely to be tougher. With 10-year venture capital returns standing at 3.3 percent as of the end of 2011 — and only recently pulling out of negative territory — the institutions that traditionally invest in venture have grown more skeptical of the asset class.

“It’s no secret, it’s a very tough fundraising environment,” Biddle said. He cited the strong demand and dismal yield on Treasury bonds as a sign that “people are scared, people want liquidity.”

“People are wary about tying up cash for long periods of time,” he said. “And it’s no secret that venture returns have not been terrific over the last 10 years.”

Novak Biddle’s Washington-area portfolio includes Landover-based “school as a service” startup 2Tor Inc., facial recognition technology company Digital Signal Corp., based in Chantilly, and McLean based

Clearspring Technologies Inc., which was recently rebranded as AddThis.

Bronner won’t be making investments in new companies with the sixth fund, Biddle said, but will continue to work with his existing portfolio companies. Scholl, a former telecom entrepreneur, will however be working with new investments despite his limited role.

If successful, Novak Biddle would join a handful of other local venture shops that recently closed new funds.

D.C.-based Revolution Growth, run by Steve Case, Ted Leonsis and Donn Davis, rolled out its inaugural $450 million growth fund in December. Chevy Chase-based NEA said in May it raised $2 billion of a potential $2.5 billion fund, its 14th. New Jersey-based Edison Ventures, which has an office in McLean, raised $249 million in February. Updata Partners, based in Virginia and New Jersey, is weighing whether to raise its fifth fund, and Vienna-based Grotech Ventures has filed paperwork to raise a $200 million fund.


http://www.bizjournals.com/washington/print-edition/2012/06/22/novak-biddle-venture-partners-raising.html