With New $875M Fund, JMI Equity Maintains Focused Strategy on Software Deals

12/23/10Follow @bvbigelow

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three years after JMI partnered with Hellman & Friedman, the private equity firm with offices in San Francisco and New York, to take DoubleClick private in a deal that was valued at $1.1 billion in 2005.

“What we’re looking for are markets that are growing, and entrepreneurial companies with innovative technology, what we call bootstrap-type companies,” Barber says. “What we provide is capital—sometimes it’s capital needed to grow the business, or capital that provides an exit for the founders and early investors.”

Barber cites San Diego-based Service-Now.com as a classic JMI investment. The founder and CEO, Fred Luddy, was the former chief technology officer at Peregrine Systems and already had a deep understanding of enterprise software that companies use to keep track of computers and other equipment. After Peregrine’s implosion, Luddy saw the opportunity to develop similar asset tracking technology based instead on software-as-a-service.

“We’ve done software-as-a-service plays all around the country,” Barber says. “There are huge benefits for customers, with lower cost of ownership and no servers to maintain. And for the software company, it allows faster innovation. Service-Now can update its software three times a year, where it used to take an enterprise software developer two years to do an update.”

JMI also has invested in another San Diego company, DriveCam, which has moved from a hardware component business model with a wireless video camera to a Web-based subscription business that helps fleet operators reduce the risky driving habits of their drivers. But Barber emphasizes that JMI makes its investments nationwide. “We call all the companies in a given space, and if the best one is based in Atlanta, that’s where we go,” he says.

At the same time, though, Barber says he’s sympathetic to efforts in San Diego to boost local software innovation. “Clearly San Diego needs a healthy venture capital market to help entrepreneurs in the early stages, and JMI is both a supporter of that [mission] and a beneficiary.”

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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