Ed Bennett of newly formed (212) Ventures isn't afraid to ask the question, even though his firm and Investcorp, a global investment concern, announced a $200 million technology-focused fund this week.

With the markets in a downturn, VCs have to be choosier about where they invest, so smaller funds may come back in style. (212) and Investcorp are in good company. Wit Soundview, the VC arm of Wit Capital, this week raised a $270 million fund focused on Internet and technology companies. There was enough interest to raise $500 million, but the firm turned away the extra money, Mr. DeWolf says.

Why not take all comers? Wit Soundview limited the size of its fund because it wants to invest in "good deals," a consistent number of which pop up every year, says Daniel DeWolf, managing director of the New York-based firm. During the past couple years, VCs have been less discriminating with their capital, investing in nearly all deals, not necessarily sound ones, he says.

BETTER, NOT BIGGER

For the past several months, $1 billion funds have become commonplace. There are now more than 15 billion-dollar funds in the U.S., according to Venture Economics, a firm that tracks the VC industry. Some members of the billion-dollar club are Benchmark Capital, Oak Investment Partners, Summit Partners, and Warburg Pincus Ventures.

Wit Soundview's fund is an indication that wealthy investors apparently aren't bothered by the stock markets' recent performance. The firm's latest fund is its third and by far the largest. The two previous funds were a $20 million fund raised in 1998, followed by a $40 million fund. Wit Soundview invested both funds in about 25 companies, five of which are now publicly traded.

With the new fund in place, the firm will step up its investment pace. It will invest the fund over the next 18 months in up to 30 companies, including three unnamed companies that have already received funding. There's still a high-tech revolution going on that's brimming with hungry startups in need of financial assistance, Mr. DeWolf says.

SUPPLEMENTAL NETWORKS

The $200 million fund raised by Investcorp and (212) pairs two different groups of investors. Investcorp is a firm with deep pockets -- it manages $16 billion in investments -- and has international contacts. Its weakness is its limited experience in the tech market. (212) is made up of wealthy individuals who during the past few years have nurtured U.S. industry relationships and made successful early-stage tech investments.

The partnership allows Investcorp and (212) to share their strengths in other ways. Investcorp has close ties with investment bankers, who often learn early which startups are close to an initial public offering, and (212) has extensive contacts in entrepreneurial and VC circles.

Looking back, the four partners in (212) -- which takes its name from New York City's area code -- say they could have won even more substantial returns with their individual investments if they had more capital to start with. It was common for other, bigger investors to piggyback the partners into early-stage deals and make off with much greater returns.

For instance, Mr. Bennett invested $400,000 in Spinner Networks, a San Francisco-based online music portal. When America Online bought Spinner last year, his investment was worth $10 million. Corporate backers that made larger initial investments made off with even sweeter returns.

"We were making a lot of money for other people," he says.

MODEST PROPOSALS

Members of (212) met Investcorp partners last November, when the investment firm was dabbling in technology startups, says Savio Tung, who heads Investcorp's modest technology-investment department of six, which is split between London and New York. Investcorp made eight tech investments on its own and was just getting started. Its corporate clients were expressing interest in technology investments.

The firms already have invested in three startups together: Bigfoot Interactive, an online marketing firm; MobileLogic, a wireless technology outfit; and Mighty Seven Networks, a company that offers customized marketing services.

Investcorp is beginning to throw its weight around in the tech sector. Just a few days ago the firm invested $125 million in TelePacific Communications, a telecom startup, and this week it will invest more than $50 million in a London-based application service provider (ASP), Mr. Tung says.

Though those deals involve big money, he says he's also interested in small first-round investments of only a few million dollars. Ditto for Mr. Bennett. They say a $200 million fund is just fine, thanks.

"I'm not that ambitious," Mr. Tung says. "I'm not running a multibillion dollar fund."

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