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Venture Buyouts, Silicon Valley’s New Game

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Nicholas Carr was right, technology markets are mature and many companies need to restructure. There are still no Google type ideas out there in the market. Time for what what Peter Dolan, Director of Private Equity, Harvard Management Company calls “a newly emerging investment category, venture buyouts.” Need proof – look no further than announcements from past week or so.

The $12 billion buyout of SunGuard Technologies led by Silver Lake Partners last month has been followed by news that Garnett & Helfrich Capital invested $35 million in Wyse Technologies, taking a controlling share in the company. Apax Partners recently merged with Saunders Karp & Megrue, a buyout firm. Ignition Partners last week announced that it will try its hand at buyouts.

And now my friends at August Capital have launched their fourth fund – $550 million – with provisions for private equity and buyout deals. Venture buyouts are turning into a hot new category – thanks in part to the market conditions. “While our focus is still on early stage investments, we are going to invest in management led buyouts or spin-offs,” says David Hornik, who along with Vivek Mehra been made general partners in August Capital’s new fund.