[[Updated: See editor's note below.]]

Founder Collective, a new seed-stage venture fund in Somerville, MA, has received total investments and commitments of $30 million from limited partner investors, Eric Paley, a general partner of the firm, told Xconomy in an e-mail. Yesterday the firm filed papers with the SEC that show that it has raised $24.4 million out of a planned $50 million in investments, but Paley noted that the group has garnered additional financing committments since the papers were finalized.  The firm was founded by Paley—a former senior advisor to IDG Ventures (now Flybridge Capital Partners) and the co-founder and former CEO of Brontes Technologies, which was acquired by 3M—and by David Frankel, the co-founder of The Internet Solution.

[[Editor's note: This news brief was updated to report that Founder Collective has recieved additional investment commitments for its seed fund since filing documents with the SEC.]]

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Waltham, MA-based Kepha Partners, founded by former Highland Capital partner Joe Tango, will announce today that it has closed fundraising on its first investment fund, totaling $100 million, according to a report in Mass High Tech. Kepha, which has already invested in early-stage tech firms in the Boston area such as AutoVirt, Azuki Systems, and Byledge, says in its mission statement that it wants to “become the McKinsey & Co. for entrepreneurs”—meaning, apparently, that it hopes promising entrepreneurs will seek it out for its startup-building acumen.

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Waltham, MA-based Atlas Venture has embarked on fundraising for a new venture capital fund, and hopes to raise $500 million, according to reports today in VentureWire and PE Hub. It’s the eighth fund the firm has raised since its founding in 1980; the seventh fund, closed in 2006, totaled $385 million.

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Andy Sack’s favorite coffee drink is a 12-ounce, single-shot, non-fat latte. But if you’re meeting with him to pitch your latest technology startup idea, be advised that he’s probably on his second or third cup already. These days, his schedule is filled with meetings and networking—most of it pretty informal. “I’ll have coffee with anyone,” he says.

On Tuesday morning, he sat down with me at Louisa’s Cafe near Lake Union in Seattle. It’s where Sack hosts his weekly “open coffee” hour, drawing a regular crowd of entrepreneur types looking to network over coffee and pastries. (”They don’t have the best coffee, but they have the best blueberry scones,” says Sack—and he’s right.) I wanted to get the full story of Founder’s Co-op, the startup fund run by Sack and fellow Web entrepreneur Chris DeVore, as well as hear feedback from the community. Back in June, I reported on the background and motivation behind the half-year-old venture. Then, just a week ago, Luke reported that Sack and DeVore have raised a new round of funding and announced 14 limited partners in the fund, all of them tech entrepreneurs who are well-known in Seattle innovation circles.

It’s a unique model, and Sack began by clarifying the terms of the new financing. The fund is $2.5 million, with each limited partner (LP) putting in $150-200K, which buys each of them a stake in all of the startups to be funded. They will meet as a group six to eight times a year. “It’s a peer-to-peer, seed-stage fund,” says Sack. “Chris and I are the decision makers—it’s not a democracy. As a group, the LPs provide deal flow and help guide our investment strategy.” Crucially, they will also provide mentoring and connections for the portfolio companies, which Sack says will typically be made up of small teams of young, first-time entrepreneurs (usually just two people).

The peer-to-peer aspect is a big part of what makes Founder’s Co-op different from the Y Combinator and TechStar incubators of the world (we’ve covered those here and here). The firm’s limited partners include Ben Elowitz and Kevin Flaherty of Wetpaint, Andy Liu and David Niu from BuddyTV, Adam Brotman from Corbis and Barefoot Yoga, and Geoff Entress, formerly of Madrona Venture Group. I asked a few of them about their involvement in the fund, and what’s special about it. “The model is special because it really helps entrepreneurs jump start their businesses,” says BuddyTV’s Niu. “They don’t have to worry about some associated startup infrastructural costs like phones, Internet, etc. if they move into the co-op’s office. In addition, they can access a wide range of ideas and experiences from Andy [Sack] and other LPs who have successfully started their own companies and want to give back to other local entrepreneurs.”

As for why he joined, Niu touts “the opportunity to work with Andy and the other LPs. I have a great amount of respect for what they have accomplished individually, and I think pooling their collective experiences will be a formidable asset that portfolio companies can tap…Of course, there is much less certainty and a higher chance to see failure when you invest in something early stage and unproven. At the same time, you can have an outsized positive influence and guiding hand to hopefully channel them towards success.”

Kevin Flaherty of Wetpaint echoes the sentiment about Sack and the other partners. “They all have miles of experience in the startup world. Being able to experience how they evaluate potential investments is a great learning opportunity for me. From a purely financial standpoint, there is a great need in the Seattle startup community for this type of investment. Matching that need with good insight provides a great opportunity for a solid rate of return,” Flaherty says. “We’ve already seen less venture interest in certain types of businesses and renewed focus on certain business metrics that for a while were undervalued. That being said, I expect there to be significant startup activity that is uniquely suited for Founders Co-op. Two folks in a garage are perfect for the fund.”

I also gathered some reactions from people outside the co-op—local angel investors and …Next Page »

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This is a revised version of an essay that Microsoft’s Don Dodge published today in his personal blog and contributed simultaneously to Xconomy.

Commonwealth Capital Ventures held their annual open house this week at their Winter Street offices on “VC Hill” in Waltham. VC Hill is to Boston/Waltham what Sand Hill Road is to Silicon Valley—the center of Venture Capital for the region.

Commonwealth Capital recently closed on a large new venture capital fund. Longworth Ventures, another Boston/Waltham based VC firm, also recently closed a new fund. In fact, over the past year or so, several Boston firms have raised over $2 billion in venture capital. While the financial markets on Wall Street are in a panic, the venture capital community in Boston is strong, with billions of dollars to invest in innovative startups.

Boston based VC firms that have raised funds over the last year or so include Flybridge Venture Capital, Spark Capital, Fairhaven Capital, Commonwealth Capital, Longworth Venture Partners, Battery Ventures, 406 Ventures, Ascent Venture Partners, and Staley Capital.

If you look over the past three years, with giant firms like Polaris Ventures, Highland Capital, and General Catalyst raising huge funds, the total funds raised in Boston exceed $10 billion.

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Waltham, MA-based Longworth Venture Partners plans to raise $180 million for a new fund, its third, according to regulatory filings cited today by Private Equity Hub. The firm’s first fund of $20.5 million closed in 1999 and its second fund of $120 million closed in 2003; recent payoffs for the firm’s portfolio include Softricity (which was acquired by Microsoft in 2006) and Constant Contact (which went public last year).

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Accretive Exit Capital, which helps venture capital and buyout firms by buying their stakes in companies they’re tired of managing or that they’re eager to monetize, said today that it has closed its first fund, totaling $125 million. The firm, based in Boston and West Palm Beach, FL, says that the fund, put together in just 45 days, is the largest first-time fund ever raised in the so-called “secondary private equity” market.

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Boston-based venture firm Rockport Capital is upping the ante on cleantech investing. The six-partner firm, which has focused since its founding eight years ago on cleaner and more efficient energy and production technologies, announced today that it has finished raising its third fund. It’s Rockport’s largest fund by a long shot, weighing in at a hefty $450 million (compared to the $385 million it gathered for its previous two funds combined). “We believe that makes it the largest fund solely dedicated to cleantech investing that’s ever been raised,” says general partner Janet Burrows James.

Plenty of local venture firms are putting money into technologies such as biofuel production methods that don’t depend on food crops, cleaner ways of burning coal, and solar cells that turn more of the sun’s energy into electricity. But Rockport’s new fund raises the bar substantially, especially when compared to the $273 million in venture money raised by all Massachusetts cleantech startups combined in 2007.

I asked James what sets the new fund apart—other than its size and its cleantech focus. But Rockport is hard to pin down, as it turns out. “We have a very broad focus,” James says. Unlike many venture firms, Rockport is “agnostic” about the stage of growth that its target companies are at, and it doesn’t limit its investments to companies in any particular geographical region. (It opened an office in Menlo Park, CA, last year to help stay in touch with the 40 percent of its portfolio companies that are based on the West Coast, James says.)

The company’s only real concentration is on a trio of fields that it describes as energy and power technologies, advanced materials, and “process and prevention,” meaning technologies that mitigate the environmental impact of industrial processes by reducing inputs or waste. But a quick glance at Rockport’s list of 28 portfolio companies shows that few fit neatly into just one of these three boxes. Most, in fact, seem to span all three—which isn’t terribly surprising, since new materials and processes are often a key part of clean energy technologies. For example, Portsmouth, NH-based Powerspan, is developing electro-catalytic oxidation systems that remove pollutants from flue gas at coal-fired electrical plants, in the process producing an ammonium sulfate compound that can be used as fertilizer.

Rockport raised its first fund of $125 million in 2001, and closed its second fund of just over $260 million in January, 2006. That fund is now fully invested in portfolio companies, so the time was right to start a new fund, James says.

Raising cash for the third fund was easy, she says. “We like to joke that this is the lowest-carbon-footprint fund raise that has ever been done,” she says. “We didn’t undertake road shows—we basically raised the funds from our existing investors and from interested outside investors who had been following Rockport and cleantech for the last couple of years.”

James calls the fund’s limited partner investors, a group that includes endowments, foundations, pension funds, and funds of funds, “a real blue-chip roster that we’re very excited about.”

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Summit Partners, a private equity and venture capital firm with offices in Boston, London, and Palo Alto, said yesterday that it has closed two new investment funds, a €1 billion European private equity fund and an $825 million subordinated debt fund. (We looked it up, and “subordinated debt” is debt that’s paid off after most of a company’s other liabilities in the event of bankruptcy. In other words, it carries greater risk, and can therefore be leveraged for greater amounts of equity in target companies.) Summit, which now has investable assets of nearly $6 billion, says it will use the funds “to acquire minority and majority positions in successful, growing companies across many industries, including technology, business and financial services, consumer and industrial products, energy, healthcare and life sciences, Internet and information services, as well as media and entertainment.”

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Dan Primack of Private Equity Hub is reporting today that .406 Ventures, the Boston-based early stage venture capital firm founded in 2005 by local entrepreneurs Maria Cirino, Larry Begley, and Liam Donohue, has finished raising its first investment fund. The firm gathered $167 million altogether, mostly from institutional investors such as Parish Capital.

Primack (one of our favorite financial reporters) apparently nagged Cirino for months for some word about the firm’s fundraising progress, to no avail—for legal reasons, Cirino couldn’t say anything publicly until the fund was closed. But she e-mailed Primack yesterday with the news that the fund had been topped off, at about $17 million over the firm’s initial $150 million target.

.406, which is named after Ted William’s record-setting 1941 batting average for the Red Sox, says it prefers to be the first investor and the lead investor in new, market-changing software and services ventures. One of its three core operating principles is “a commitment to ‘back-to-basics’ venture capital disciplines focused on operational excellence, entrepreneurial spirit and capital efficiency.” Its portofolio companies, which are all based in Massachusetts, include:

• Cambrige, MA-based Bit9, whose software allows IT managers to control which applications run on company desktops
• Boston-based Business Intelligence Advisors, which is applying intelligence-gathering techniques to business research
• Newton, MA-based ChosenSecurity, which provides public-key-infrastructure-based encryption certificates as a managed service
• Boston-based Health Dialog, whose analytics software helps health-care organizations reduce costs; .406’s first exit, the company was acquired by UK-based health insurer BUPA last year
• Concord-based Memento, which makes fraud-detection software for banks and credit unions
• Boston-based Optaros, which creates AJAX-based rich Internet applications for other companies
• Needham, MA-based RatePoint, which helps companies collect customer feedback information online
• Cambridge, MA-based ThingMagic, which makes advanced RFID hardware and software for consumer and industrial applications (see our recent story on ThingMagic’s collaboration with DeWalt and Ford)
• Burlington, MA-based Veracode, which evaluates the binary code behind complex software for security holes (see our January profile).

Cirino told Primack, however, that .406 is open to investment opportunities outside Massachusetts, and that it’s currently looking at a deal in Seattle.

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