Some of the best ideas occur over breakfast. One morning in February 2003, veteran Silicon Valley venture capitalists Terry Garnett and David Helfrich met over granola and berries at Palo Alto's popular Il Fornaio and fell to discussing how many technology start-ups had been acquired during the late '90s only to be neglected by their giant parent companies when the tech bubble burst. The pair concluded, Why not buy these companies back and rejuvenate them?

By year-end the two 47-year-olds had formed Menlo Park, California-based Garnett & Helfrich Capital, which in April closed its first "venture buyout" fund. The $250 million fund aims to purchase unwanted tech units and guide them to stand-alone profitability. Investors include Grove Street Advisors, Harvard Management Co. and Stanford Management Co.

Garnett, a former Oracle executive who most recently was a general partner in the Rockefeller family's Venrock Associates, and Helfrich, co-founder of venture capital firm ComVentures, are looking for undervalued software, semiconductor and Internet media businesses or product lines. "You can actually buy businesses now at extraordinary discounts," notes Helfrich.

The firm is targeting companies valued at $15 million to $30 million that have cash flow and customers. It plans to bring in experienced CEOs, improve operational efficiency and develop existing technologies for three to five years before exiting.  "The concept that a business segment with $30 million to $50 million in revenue could be insignificant -- to the point where a parent company might shut it down -- is just foreign to where we come from," says Garnett.