Founded in 1981, Zero Stage Capital currently manages $250 million in capital. Zero Stage chooses early and later stage investments in information technology, software, communications and healthcare companies. According to the company, a Zero Stage effect is the process of taking "something and lift[ing] its nature to a whole new level." A graphic on Zero Stage's website of a bicycle morphing into a motorcycle illustrates this notion. The firm's latest fund, Zero Stage Capital, L.P. VI, closed with $125 million in October 1999.

Investment strategy

Generally, Zero Stage invests $500,000 to $5 million per venture round with each portfolio company, and will invest up to $5 or $6 million over the investment lifecycle. While many venture capital firms offer start-ups enormous amounts of funding, Zero Stage is wary of overfunding young firms. Stan Fung, a managing director at Zero Stage, explained Zero Stage's "less is more" investment philosophy in a recent interview with Red Herring. "If a start-up suddenly has too much money," Fung said, "it's tempted to start executing before it properly develops a business strategy. If there is some constraint on capital, entrepreneurs spend it more efficiently, and measure the response [to their product or service] before spending more."

Portfolio

Since its formation, Zero Stage has invested in more than 90 companies. 19 Zero Stage portfolio companies have gone public and another 26 have merged with other firms. Most of Zero Stage's portfolio companies are located in the northeastern United States. Current portfolio investments include companies such as 24/7 Media, About.com, Gazelle Systems, iDolls.com, ImproveNet, MotherNature.com and Silknet Software. Zero Stage also invests in healthcare companies, including eMed and Kinetix Pharmaceuticals.

Partners

The five managing directors of Zero Capital possess eight graduate degrees among them. The founders Dr. Gordon Baty and Paul Kelley have more than 55 years of combined experience in operating and investing in new companies. Even as Zero Stage grows, the partners continue to take a hands-on approach with portfolio companies. Though Zero Stage has only nine professionals on staff, the firm maintains four offices (all in New England) in order to maintain geographic proximity to the portfolio companies.