Arthur Klausner has resigned from the general partnership of Domain Associates, citing philosophical differences over investment strategy. He leaves the Princeton, N.J.-based venture capital firm after a 14-year run, the past seven as general partner.
“I had two roles at Domain, one on the investing side and one on the fund administration and research side,” Klausner says. “I wanted to do more on the investing side and the partners wanted me more on the firm administration side.”
The reason for this divergence was that Klausner’s partners weren’t terribly thrilled with the types of deals he was bringing to the table. Specifically, Domain prefers to invest in early-stage life sciences companies that already have proven some clinical efficacy or, even better, have a product on the market. Klausner, on the other hand, was partial to less mature companies that could best be described as “science-stage.”
“We are a consensual partnership in that you suggest deals you want to do, but everyone has to agree on them,” says Jim Blair, a general partner and co-founder of Domain. “The common denominator of Arthur’s deals was that they tended to have earlier sciences than we usually invest in, although we probably like to have two or three of those in a fund. I didn’t want Arthur to leave, but I do understand his decision.”
Klausner still occasionally works from his former Domain office, and he says he is available to help the Domain team with any issues that may come up. The firm already has transitioned some of his board seats to other partners, although he will maintain his seats at both Senomyx Inc. and Santarus Inc. Senomyx is a La Jolla, Calif.-based developer of flavor and fragrance molecules for consumer products. Santarus is a San Diego-based drug company focused on gastrointestinal diseases and is in registration for a $92.3 million IPO.
Both Klausner and Blair acknowledge that the timing of such a move is poor, as Domain closed its $500 million sixth fund four months ago. At the time, Klausner said that prospective LPs asked a number of questions about the team, and wanted to make sure that everyone was on board. He now says that there was no intention to deceive, and that he did not consider leaving until after the fund had closed in late December.
“There was a reasonable amount of surprise among limited partners when we told them, but Domain has a large team for a VC firm and a deep team in terms of industrial knowledge,” Klausner explains. “One person leaving really shouldn’t slow down the firm’s momentum.”
Limited partners were informed of the defection via letter, although some newer investors also received personal phone calls. Those contacted by PE Week said that they were surprised by the timing, but not by the departure itself.
Klausner has no immediate plans, save for a couple of weeks vacationing in the Caribbean. After that, he hopes to either join an existing group, or find a partner so that he can launch a new firm himself.