Michael Stark’s Crosslink Capital’s Return, AUM, and Holdings
Crosslink Capital is a San Francisco-based hedge fund with the main focus on technology companies. It was co-founded by Seymour Franklin Kaufman and Michael Stark back in 1989. The fund provides an additional office in Palo Alto, California. Prior to co-founding Crosslink Capital, Michael Stark worked at Roberston Stephens as a Director of Research and Equity Analyst in charge of software and semiconductor businesses. And, before joining Robertson Stephens, he was gaining work experiences at Intel Corporation’s strategic planning group. He earned an M.B.A. with honors and Distinction from the University of Michigan and a B.S. in Engineering from the Northwestern University. Michael Stark supervises all investment-related activities of the Fund, while also serving as a portfolio manager of Crosslink Capital’s emerging growth, long/short funds and all crossover funds.
Seymour Franklin Kaufman, who co-founded the firm together with Michael Stark, is now semi-retired, which means he still has some duties in the firm related to venture capital activities in various sectors, such as the internet, software, and digital media, to name a few. Before launching Crosslink Capital, Seymour Kaufman was employed as an Equity Analyst and General Partner at Hambrecht & Quist, where he was managing semiconductor, technology, and data communications industries. He earned his M.B.A. from Satna Clara University, an M.S. in Electrical Engineering from San Jose State University and a B.S.E.E. in Electrical Engineering from the City University of New York.
Crosslink Capital employs venture capital investing, which means that the company also invests in projects and businesses that are either new or in the process of expanding, in that manner supporting new entrepreneurs. Technology-related companies at all stages (from seed financing all the way to public markets), and of small to mid-cap sizes are the fund’s targets. Although this type of investing carries a certain amount of risk, when played smart it can bring fantastic gains. In any case, Crosslink Capital doesn’t only rely on this type of investing, but it also applies hedge fund investing, managing several hedge funds for its clients.
It is said that by combining these two types of investing, Crosslink Capital manages to “play both sides of the tech coin to winning effect”. The fund employs a long/short strategy and tends to obtain a board seat in companies it invests in. Its equity portfolio is usually concentrated, and according to its Plain Brochure, on December 31, 2015, the fund had around $1.6 billion in assets under management. Crosslink Capital’s philosophy must be very wise, as it had many positive returns throughout the years.
For example, its Crosslink Emerging Growth Fund, L.P. brought back a fantastic 13.45% in 2013, 7.31% in 2014, 9.74% in 2015, and then the next year it had a negative return of 4.04%. It came back strong in 2017 with a return of 13.18%, and it continued to have a positive performance in 2018, gaining 8.26% through October. Crosslink Emerging Growth Fund, L.P. had a total return of 102.49% for a compound annual return of 7.13%, while its worst drawdown was of 22.38.
Its Crosslink Partners, L.P. also had an impressive track record, delivering 12.20% in 2013, 5.73% in 2014, 9.90% in 2015, while also dropping down by 4.50% in 2016. Then, 2017 was again a good year for this fund, bringing back 13.18%, followed by 8.42% in 2018 (through October). Crosslink Partners, L.P. achieved a total return of 689.91%, for a compound annual return of 11.6%, and its worst drawdown was 27.84.
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On the next page, you can read more about the fund’s highest stakes and the changes it has made to its concentrated equity portfolio during the fourth quarter of 2018.
At the end of the fourth quarter of 2018, Crosslink Capital’s equity portfolio was valued at $354.7 million, after the fund has made several changes to it. During the quarter, the fund didn’t make new investments, but it has dumped six companies, while also raising and lowering its positions in many. Among its top 10 positions on December 31, 2018, was $17.37 million worth a stake in salesforce.com, inc. (NYSE:CRM), on the account of 126,784 shares outstanding. Salesforce.com is a cloud-based software company and one of the 30 Most Popular Stocks Among Hedge Funds. The fund actually raised its stake in the company during Q4 2018 by 4.9%.
The biggest position the fund held at the end of December 2018, was in Pandora Media Llc (NYSE:P). After the fund had lowered its stake in it by 5%, the position was worth $33.37 million, on the account of 4.12 million shares. Pandora Media is a company that offers music-related services, such as streaming radio, for example, and according to recent news, it was acquired by Sirius XM Holdings Inc. (NASDAQ: SIRI) at the beginning of February. The second biggest position in Crosslink Capital’s portfolio at the end of Q4 2018, was in Coupa Software Inc (NASDAQ:COUP). During the fourth quarter, the fund raised its stake by 9% to 520,584 shares, worth $32.72 million. Coupa Software is a company that provides a global cloud-based platform for Business Spend Management, connecting suppliers and organizations. Its market cap is of $5.65 billion. It has its headquarters in San Mateo, California, and additional offices in Europe, Asia Pacific, and Latin America. At the end of the third quarter of 2018, there were 39 smart money investors from Insider Monkey’s database long this stock, compared to 27 in one quarter earlier. Over the past six months, the company’s stock gained 42.90%, and, at the moment of writing, it is trading at $95.03. For the third quarter of fiscal 2019, Coupa Software reported total revenues of $67.5 million, which represents an increase of 42% compared to the corresponding quarter in 2018.
The third largest position, occupying 8.86% of Crosslink Capital’s portfolio was in Palo Alto Networks Inc (NYSE:PANW). Its stake counted 166,718 shares, with a value of $31.40 million. Palo Alto Networks is a company that provides cybersecurity services, mostly known for its platform with professional firewalls and cloud-based extensions covering a range of security issues. This Santa Clara-based company has a market cap of $21.81 billion. Over the past 12 years, the company’s stock gained 41.11%, and it is now trading at $229.90. For the first quarter of fiscal 2019, ended on 31st October 2018, the Palo Alto Networks reported total revenue of $656 million, which represents an increase of 31%, compared to the same period in the previous year. The company also disclosed a net loss of $0.41 per share, compared to a loss per share of $0.70 for the same period in the previous year. Recently, Palo Alto Networks announced that it plans to acquire Demisto, a company that offers an automated incident response platform, for $560 million. According to Insider Monkey’s database, 49 hedge funds were bullish on this stock at the end of September 2018, versus 42 hedge funds with long positions at the end of June 2018.
During the Q4 of 2018, Crosslink Capital decided to dump six companies. Among the biggest positions it had dropped, were those in Facebook, Inc. Common Stock (NASDAQ:FB), Zendesk Inc (NYSE:ZEN), and Amazon.com, Inc.(NASDAQ:AMZN). Its stake in Facebook counted 153,566 shares outstanding, with a value of $25.26 million, in Zendesk it was worth $8.18 million, on the account of 115,186 shares, whereas in Amazon, the fund’s position was worth around $7.44 million based on 3,713 shares outstanding.
Disclosure: None
This article was originally published at Insider Monkey.
