Venture capitalist Roger McNamee likes attention. At T. Rowe Price, he garnered plenty by picking winners like Electronic Arts and Sybase. In 1991, he persuaded VC outfit Kleiner Perkins to fund his firm, Integral Capital, and scored an office within shouting distance of famed VC John Doerr. This summer, McNamee unveils his most audacious venture yet - Silver Lake Partners, a $1 billion buyout fund for the high tech industry.
Traditional buyout funds acquire ailing companies and break them into sellable pieces or restructure them to be more profitable. Typically they target companies with hard assets, like factories and equipment, that can be used as leverage. High tech is trickier because the greatest resources are often intangibles - a brilliant engineer, coveted patents, code. "High tech buyouts run counter to the Silicon Valley VC way of finance," says Josh Kosman of the newsletter Buyouts. "VCs want companies that grow twentyfold a year. Buyouts look for steady growth, try to spike it, and sell."
According to McNamee, there's a middle ground to be exploited. "The valuation disparity between market leaders and lower stocks is an incredible opportunity,"he says.
Silver Lake aims to trawl Fortune 500 companies for undervalued orphans, technology divisions that are out of step with the corporate mission. Once it adopts an orphan, it'll goose the management, restructure debt, and take the firm public or sell it. Joining McNamee at Silver Lake are former execs from the Blackstone Group, Oracle, and Hambrecht & Quist.
The investment community is taking notice. With Thom Weisel, founder of Montgomery Securities, planning to launch a similar fund this fall, all eyes are now on Silver Lake. And that suits McNamee just fine.
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