Celsius Capital

There was a story about me leaving Celsius Capital yesterday in Private Equity Week.  It’s actually pretty old news, but I've gotten a bunch of e-mails on it so I thought I would elaborate a bit on the article.

First off, I not only remain good friends all the guys at Celsius but I also remain an ardent supporter of and a close advisor to the fund.  It was a blast working with all of them and we are hopefully going to figure out some ways to work together in the future.

We set up Celsius in Q1 of last year to raise an early stage VC fund that invested in both China and US and tried to exploit what we saw as the "investment arbitrage" opportunities that exist between the two markets.  I was going to handle the US end of things while my partner Carlos Bhola, who had been investing in China since 1998 and had some huge hits there, would handle China (ably assisted by my former colleague at Mobius, Tony Lo).

So we went out on the road and talked to lots of LPs both in the US, Europe and Asia.  While we were able to meet with many of top LPs (thanks almost entirely to Carlos' tireless efforts) one consistent refrain we kept getting from them was that our multi-geography focus was an issue for them.   It was an issue from an investment analysis perspective in that they were never quite sure which of their investment teams we should meet with: the US team or the Asian team (invariably they went with the Asian team) and it was an issue from a philosophical standpoint in that many LPs consider multi-geography funds to be tougher to manage given the time and space separating the partnership.   Truth is, we all knew this was going to be an issue going in, but we believed strongly in our investment thesis and wanted to give it our best shot.

After about 4 months fundraising though, it became clear to us that while trying to raise a first time VC fund is hard enough, we were going to have a particularly long battle trying to sell LPs on the merits of cross-geography, first time fund.  What's more, the idea of a very long fundraising process was particularly unappealing given that we had a rapidly growing pipeline of very promising investment opportunities, especially in China.

Given all this, it was clear to both Carlos and I that we had to focus the fund primarily on one country to eliminate LP concerns and give Celsius the best shot at success.  I pushed hard to focus the fund primarily (but not exclusively) on China for a variety of factors not the least of which were the strong team we had built there, Carlos’s record of achievement and the pipeline of promising investment opportunities.   Carlos reluctantly agreed not because he thought it was the wrong decision, but because I suspect he knew that I was essentially writing myself out of the script.  After all, while I am fascinated by China, I have no investment experience there, no language skills, and no professional interest in investing primarily in China.   In addition, neither my wife nor I are interested in moving our family to Shanghai, so that kind of sealed it.

So based on these factors, last summer I officially and very reluctantly took my name off the masthead of Celsius.  While it was the right, intellectually honest, decision for the firm, it was a tough one for Carlos and I because we really enjoyed working together.  Fortunately, we told the LPs we were meeting with about the change and it was well received as it made the investment much easier for them to categorize, evaluate, and allocate to.

It’s now more than six months later.  Celsius is still doing well and in addition to making some new investments should hopefully close its first formal fund in the near future.  After a couple months off, I have been working on a new US-based fund and I am looking forward to eventually finding a way to work with Celsius.

So, not that anyone really cared, but that’s the full story.