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Silver Lake goes for the gold
But what does a $4 billion buyout fund mean to the individual investor?
August 13, 2003: 5:37 PM EDT
By Adam Lashinsky, CNN/Money Contributing Columnist

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MENLO PARK, Calif. (CNN/Money) - You'll be hearing a lot shortly after Labor Day about a Silicon Valley-based private-equity firm called Silver Lake Partners. Try your very best to ignore what you hear.

According to a cascade of press reports attributed to unofficial sources who in all likelihood actually know what they're talking about, Silver Lake will begin raising its second fund in September. (The New York Post first broke this story weeks ago, followed by Bloomberg, then this week by the Financial Times, which was picked up by Dow Jones and re-printed in the Wall Street Journal.)

In 1999, Silver Lake raised its first fund, a $2.3 billion pot of money geared toward buying technology companies. This next one is said to be targeting $3 billion, with the rumor that Silver Lake will accept up to $4 billion.

The important question individual investors need to consider as they confront the imminent Silver Lake hype-fest is: Who cares?

As someone who has spent a considerable amount of time with each of the four founding Silver Lake Partners -- investor Roger McNamee, software executive Dave Roux, investment banker Jim Davidson and buyout ace Glenn Hutchins -- I can answer that question easily: Not you.

Professionals only

The Silver Lake story is of a great deal of interest to people in the professional fund management game. I'm talking about folks who manage pension funds, university endowments and the like.

Of course, it's also important to the companies who might like to attract investments from Silver Lake. Arm Silver Lake with billions more in cash, and they're going to add liquidity into the marketplace. Good news in general.

But there's an extremely tenuous connection between Silver Lake's success in buying large chunks of tech companies and your ability to make money investing in tech stocks.

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Keep in mind that Silver Lake has had plenty of goofs. Two of its early investments were in companies called Submit Order and eConnections. Don't know them? Maybe it's because they're not around anymore. They flopped. Silver Lake's most recent investment, in bonds of distressed telephone carrier MCI, is looking shakier and shakier as time goes by.

In fact, if there's a touchy topic around the halls of Silver Lake it's that it is so far a one-hit wonder. But what a hit: the firm's investment in Seagate has returned all its investors' money and more, and that's not counting the recent sale of Crystal Decisions, a former Seagate unit.

By the way, there's nothing wrong with a fund owing most of its success to one extraordinary investment. The problem is that hitting a home run like that is something a heavyweight firm like Silver Lake is best suited for. Your ability to emulate Silver Lake -- or even to ride its coattails -- is practically nil.

So should you pay attention to stories about Silver Lake as they appear with increasing frequency in coming weeks? Sure, if you like a good success yarn. Otherwise, stick to investment stories that are more meaningful.

Adam Lashinsky is a senior writer for Fortune magazine. Send e-mail to Adam at

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