The Early Stage Alternative Fund (ESAF) was formed in 2008. The fund is focused on fast-growing companies in an early growth stage. Target industries include IT and software, media, biotechnology and alternative energy.
In contrast to the common practice of venture funds, portfolio diversification is not an important objective of ESAF. This assumes necessity of a deep and thorough understanding of the specific business and imposes very selective criteria for portfolio companies:
- Only companies with a proven business model are considered. Cash generation ability is among the most important investment criteria
- The target company must have exceptional growth prospects driven by a new product/technology, or a new market
- The management must have solid track record and interests aligned with ESAF growth and exit strategy
Due to these highly selective requirements, ESAF has no formal restrictions on the target investment size and size of equity stakes in portfolio companies. A typical investment can be in the range of $5 to $15 million. Majority stakes are preferred.