Kegonsa Capital Partners Investment Strategy
Kegonsa Capital Partners ("KCP") pursues a Money for Minnows management strategy. Please visit the Money for Minnows page for more details.
The objective of Money for Minnows is to equal or exceed the national average investor rate of return for each venture capital investment segment by promoting new company creation and being the first investor in new companies. Risk is managed by investing across diverse industries, technologies, and products at locations throughout the state of Wisconsin. For investors in KCP-managed funds, such diversity has delivered superior investor returns. (i.e., returns in excess of the national average).
KCP manages the Kegonsa Seed Fund I, LP (the "Seed Fund") and the Kegonsa Coinvest Fund I, LLC (the "Coinvest Fund"). Both funds and all fund employees are based in Wisconsin
KCP managed funds prefer to be the first investor in a portfolio company. By investing early, and sometimes forming the company or investing within a few months of the company being formed, KCP portfolio funds obtain excellent company valuations with their first investment. KCP funds have invested in inventor-formed companies, companies based on university licenses, and entrepreneur-formed companies
In managing the Seed Fund, KCP formed 25 percent of the portfolio companies. 50 percent of the portfolio companies were formed by a product inventor. When the Seed Fund invested in a founder/inventor company, one condition of the investment was that the founder/inventor and KCP would recruit a mutually acceptable CEO. The key KCP investment criterion for portfolio funds is the experience of the portfolio company management.
The Seed Fund has delivered an annual internal rate of return ("IRR") of 27 percent from June 1, 2004 (fund inception) through July 1, 2012. This compares to a national average annual IRR of 0.7 percent for the PEPI* seed/early stage funds in their tenth year through December 31, 2011.
The Seed Fund returned all of the investor's capital contributions to the Fund by the seventh year of operation.
The Coinvest Fund has delivered an annual IRR of 4.7 percent since it began operations in Q4 2006 through July 1, 2012. In comparison, the PEPI shows a national average annual IRR of 0.8 percent for seed/early stage funds in their fifth year through December 31, 2011.
According to PEPI the seed/early stage investment segment provides the greatest investor return compared to all other venture capital investment segments.
* KCP uses the Thompson Rueters Private Equity Performance Index ("PEPI") as the comparative return index (please see http://dmi.thomsonreuters.com/ for more information). PEPI support includes the US National Venture Capital Association and Money Tree Report. PEPI provides investor return for a variety of private equity investment segments.
KCP managed funds invest in all product and technology segments, including Web 2.0, internet, biotech, pharmaceuticals, clean tech. This minimizes investor risk from a bubble or a downswing in a specific product or technology market.
KCP managed funds also invest in a broad geographical area. Since management and employees are both key components of a successful new company, KCP needs to minimize the risk of a geographical area having a difficult employment market for new companies. Since new companies create jobs, KCP portfolio funds invest in a variety of different employment markets to minimize this risk.
KCP manages risk in the Coinvest by limiting the KCF investment and requiring portfolio companies to obtain new investors in each investment round. If the Seed Fund and the Coinvest Fund are both investors in the same portfolio company, KCP typically will cap the Coinvest Fund investment at the Seed Fund pro rata share of the round, ensuring that KCP portfolio funds cannot be the only investors.
When the Coinvest Fund invests in a first round investment, the Coinvest Fund usually leads the round. The Coinvest Fund typically will not lead later investment rounds in portfolio companies to encourage investment from new investors and to allow the marketplace to establish portfolio company valuation.