Clarity Partners – Communications, Media and Business Services Private Equity Investors

Clarity Begins with a Bang; Los Angeles Venture Firm Clarity Partners May be Brand-New, but a $1 Billion Fund and Some Seasoned VCs Are Getting it Early Notice

Chicago - September 25, 2000

The air is clearing in Los Angeles. Multiple venture capital firms are again raising funds as this spring's stock-market turmoil recedes into history. Buoyed by an increase in Internet entrepreneurial activity in Southern California, eCompanies and Shelter Ventures, among others, are pounding the pavement in a quest for institutional dollars.

But the biggest splash is coming from newly formed Clarity Partners. The Beverly Hills firm is in the process of an aggressive bid to put itself at the top of the L.A. venture scene. Clarity is raising a $1 billion fund, an unprecedented amount for a venture firm in Southern California.

So far, the biggest fund raised in Los Angeles belongs to TMCT Ventures, managed by former Times-Mirror CFO Tom Unterman. But Unterman's $550 million kitty is different than the others because he didn't have to knock on doors across the United States to raise the capital - he's essentially managing the money of the family that founded the Los Angeles Times.

Clarity, on the other hand, is looking to institutional investors and strategic partners for its fund. In fact, the firm has been looking for months now, capturing the buzz of the Los Angeles venture scene. Some executives close to the firm say Clarity is expected to close about half of the cash in the next two weeks. Clarity partners couldn't be reached for comment.

A big part of the reason that Clarity is generating talk in L.A. investment circles is its pedigree. Its managing partners include Stephen Rader and Rudy Reinfrank, name partners at private-equity firm Rader Reinfrank Investors. Two others, Barry Porter and David Lee, founded telecom company Global Crossing (GX). The principals have known each other for a long time through business partnerships and family connections. Rader and Porter, for instance, worked together during the 1980s at Bear Sterns.

Porter and Lee left behind a notable track record at Global Crossing, but took with them amazing paper wealth: Both are ranked among L.A.'s 50 wealthiest people, according to the Los Angeles Business Journal. They are each worth between $600 million and $800 million.

To say that the notoriety that comes with such wealth and success opens doors would be an understatement. When Mark Tuomenoksa, chairman and CEO of Wakefield, Mass.-based OpenReach, received a call from adviser Jack Scanlon, former Global Crossing CEO about setting up a meeting with Clarity, he was shocked.

"My first reaction was 'Shit!, these are guys I've only read about,'" Tuomenoksa says. "The things they did at Global Crossing were amazing."

Tuomenoksa took the meeting, which resulted in Clarity's first investment. The firm invested $6 million and gave Scanlon (who is not formally part of Clarity) a board seat.

If Clarity has its way, however, the OpenReach investment will be an anomaly. The firm expects 75 percent of its fund to be used for big-ticket investments ($25 million to $200 million a pop) like spinoffs and acquisitions. The other 25 percent will be directed at conventional venture opportunities at $10 million to $25 million an investment.

"There are a lot of opportunities in Los Angeles for venture investors," says Randall Kaplan, who heads the angel investing network Jump Investors and who is putting money into the Clarity fund. "But I think these guys are going to become the dominant VCs in the L.A. market."

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