The Download: Grotech Ventures closes $225M fund

It’s hard out there for venture capital firms looking to raise money. Their primary financiers, called limited partners, are increasingly investing their dollars elsewhere after years of meager returns.

Grotech Ventures seems to be bucking the trend.

The Vienna-based investment firm announced today it officially closed a $225 million fund last month. That’s $25 million more than the firm set out to raise when it first filed with the Securities and Exchange Commission in September 2011.

Grotech typically invests between $250,000 to $3 million in early-stage upstarts. It’s core markets include digital media, Internet companies, enterprise software and health care IT, general partner and founder Frank Adams said.

The firm closed part of the round last October and has since cut 12 deals using the money, Adams said. Locally, Grotech has put money into Invincea, a cybersecurity firm. It’s also an investor in LivingSocial, HelloWallet and Personal, among others.

Venture capital firms have struggled to raise money of late. Just 35 venture capital firms nationwide raised money from limited partners during the first quarter of 2013, according to a report from the National Venture Capital Association. That’s the lowest number on record since the third quarter of 2003.

Adams said Grotech has changed its investment strategy following the economic downturn, raising smaller funds than in years past and putting money in at an earlier stage in the company’s life cycle.

Still, the fundraising process wasn’t a breeze, Adams admits. Many limited partners, such as pension funds and college endowments, are allocating fewer dollars to venture capital firms these days and taking more time to scrutinize the investments they make, he said.

“The investment environment into venture capital from traditional limited partners ... has gotten much slower and tighter than it was in the past. And the reasons for that are pretty obvious.

“Many of those pension funds have gotten burned by not getting the type of returns they expected,” Adams said.

Books business

Husband and wife. Dad and mom. Co-founders. Felix Brandon Lloyd and Jordan Lloyd Bookey hold many titles in their home.

The duo plans to announce this week that their latest venture, a children’s book Web site called Zoobean , has attracted $500,000 in a seed-stage investment round led by Oakland, Calif.-based Kapor Capital.

Zoobean provides a Web site where parents can categorize and review children’s books. They can also pay for a book-of-the-month subscription or purchase books through Amazon or other online retailers.

“If you were to go to find the right book for a little kid, it’s difficult to find that right book in the outlets that are there now,” Jordan said. “We’re curating books, which means they’re books that are handpicked or recommended by one of our parent curators.”

The pair met as teachers in a District charter school. He is a former D.C. teacher of the year, she is currently phasing out of her post as Google’s head of K-12 education outreach.

The idea for Zoobean struck when the pair was expecting their second child, a now-1-year-old daughter. They wanted to find a book that could help explain to their son, now 3, what it means to be a big brother.

“It was really when we became parents that we saw a need to better evaluate books,” Felix said.

This is the couple’s second start-up. They previously founded and subsequently sold Austin-based Skill-Life, a financial literacy program for school children that is now called MoneyIsland.

Steven Overly is a national reporter covering federal technology and energy policy with a focus on Capitol Hill. He previously covered the business of technology, biotechnology and venture capital.
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