Nicholas Watson in Prague -

Four leaders of the Czech technology scene with ties to global anti-virus player AVG Technologies have announced the first closing of a new $70mn fund that will invest in next-generation European and US cyber-security, enterprise software and consumer/enterprise crossover companies. The target of the Evolution Technology Fund LP is $125mn, which is expected to be achieved by the end of the first quarter of 2016.

The four partners of Evolution Equity Partners, a New York and Zurich-based venture capital outfit founded by tech entrepreneurs and investors Richard Seewald and Dennis Smith, and two former CEOs of AVG Karel Obluk and J.R. Smith, have worked together for several years, making investments in companies like AVG, Cognitive Security and OpenDNS. However, now they believe is a good time to ‘institutionalise’ the business, to capture the value from targeting early stage companies involved in the three technology segments that are looking to expand internationally.

“We are focused on growth stage companies that are reaching an inflexion point in their revenue growth, which is set to accelerate as they expand internationally,” Seewald tells bne IntelliNews. “The optimal time to invest in high growth technology companies is at this inflexion point, and they need a whole different set of skills to manage the business that we can help bring.”

The global information security market could reach $157bn by 2020, up from just $62bn in 2012, as the number of connected devices surges to around 50bn globally compared with just 500mn in 2003, according to Cisco Systems.

The partners have already contributed two investments to the fund, minority holdings in Security Scorecard, a New York-based firm that analyses the security risk to any business and allows chief technology officers to measure the effectiveness of their security efforts, and the Boston-based Onapsis, which looks to protect the applications that manage a company’s business-critical processes.

The plan is for the fund to make investments in 12-15 companies over the next three years, with the third target probably coming in the next two months. The investments in the range of $5mn-15mn will be held for around five years, after which exits will be made either through IPOs or trade sales. A recent example of trade sale executed by the Evolution partners was the sale of Czech cyber-security firm Cognitive Security to Cisco in 2013 for an undisclosed amount. “We’ve made some excellent investments in what is a complex segment to invest in,” says Seewald, who adds that the targeted return of the fund is three to five times the money invested.

As well as the partners’ track record and experience, Seewald cites the fund not being restricted to a particular geographic area as a key advantage. Many Central and Eastern European-focused private equity funds are finding it hard to raise new money amid the gloomy regional environment and the disappointing performance of previous funds, leading many to predict a shake-out in the region before the sector stabilises.

“There are less and less investors who want a dedicated exposure to the eastern part of the EU and beyond,” Pekka Maki, managing partner of 3TS, which raised a €108mn fund in 2013, has told bne IntelliNews. He estimates there are around 30-50 limited partners now, one tenth of the 2008 figure. "When times are bad, they are spectacularly bad in this region,” he said.

According to the European Venture Capital Association (EVCA) annual report on the region (which excludes Russia), which was published in August, €1.47bn was raised last year, compared with €1.31bn of investments. The fundraising total was more than triple the previous year's and by far the highest figure since the 2008 crisis, but it was still well below the €4.03bn raised in 2007.