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Twitter Fever Hits J.P. Morgan

March 2, 2011

On Monday, February 28, the NY Times Dealbook reported that JPMorgan Chase’s Digital Growth Fund had invested in Superman Chris Sacca’s secretive Lowercase Capital holding company – with funding rumored to exceed $1 billion – which has purchased up to 10 percent of Twitter stock at a cost of $400 million, giving Twitter an implied valuation of $4 billion.

There are some interesting threads to this story. Let’s follow the money, using SEC Form D filings.

First, two distinct J.P. Morgan Digital Growth Funds have actually filed notices of exempt offerings with the SEC in the last few weeks. One is the J.P. Morgan Digital Growth Fund L.P., organized in 2011 as a Delaware Limited Partnership. This is the fund that invested in Sacca’s Lowercase Capital holding company.

Laren Gillespie, David Lloyd, John Littlefield, Richard Ruffer, and Isatou Sey serve as Directors of the fund, which identifies itself as a venture capital fund. The minimum investment in this Digital Growth Fund is $250,000. As of the date of the filing, February 23, 2011, the fund had raised $1.217 billion from 404 investors, with “indefinite” amounts remaining to be offered and sold. J.P. Morgan Securities LLC has received more than $13 million in sales commissions on these investments, or slightly more than one percent of the total raised.

It has been less widely reported that JPMorgan Chase filed a notice on Monday, February 28 regarding the organization of a second venture fund, called the J.P. Morgan Digital Growth Offshore Special L.P., based in the Cayman Islands, and managed by four of the five directors associated with the domestic digital growth fund (missing only John Littlefield).

The four directors associated with both funds all work for Walkers, a prominent offshore legal and management services firm with offices in the Cayman Islands, British Virgin Islands, Hong Kong, Singapore, Dubai, Dublin, Jersey, and Delaware. The four directors all provide independent trustee and director services for investment companies and funds.

The J.P. Morgan Digital Growth Offshore Special Fund received its first investment on February 11. It requires a slightly higher minimum investment of $400,000 and has received a total of $634 million from 333 investors, with sales commissions of about $6.4 million. Presumably this offshore fund is hunting down non-U.S. digital investment opportunities comparable to the  investments in privately held, U.S. social media companies that the domestic Digital Growth Fund will pursue.

So the two funds cumulatively have raised nearly $2 billion and generated nearly $20 million in commissions for JPMorgan Chase. Neither fund intends to extend its offering beyond 2011.

As for Christopher Sacca, there is some mystery as to the source of his funds. He has filed six Form D exempt offering notices with the SEC since December 2009 (1,2,3,4,5,6). Some of these offerings involve multiple investors. Some do not. But the cumulative amount raised is only slightly more than $50 million. Of the offering notices, only the first, for Lowercase Ventures Fund I L.P., is listed as an offering without a cap on the offering amount, so presumably it is through this vehicle that Sacca has raised the bulk of his investment capital.

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