Harvard Endowment seeks to terminate ITU Ventures III

ITU Ventures III, a $120 million fund raised by ITU Ventures in February, is in the midst of shutting down, according to an LP document obtained by PE Week.

ITU, which is based in Los Angeles, was founded in 2000 by three 20-somethings and has raised three funds to date. It is ITU Ventures III that the Harvard Endowment is seeking to terminate, according to a staff report to the Board of Fire and Police Pension Commissioners for the city of Los Angeles, also an LP in the third fund.

Michael Perez, general manager of the pension fund, writes in the Aug. 3 report:

“ITU [III] has had several people leave. The two individuals and founders of ITU listed in the limited partnership as key people are still there but the three other individuals that made up the rest of the investment team are gone. ITU arranged a conference call with the limited partners on July 17 to discuss the situation and plans for going forward. During that call the larger investors in the fund revealed that they had gathered the necessary consents from the other investors to shut the fund down by exercising the no fault divorce clause in the partnership agreement.”

The report does not address the firm’s preceding funds, ITU Ventures and ITU Ventures II, which are going concerns.

Perez concludes the report by saying that he and his staff are working with “other investors and ITU to maximize our recovery.” The pension fund approved a $5 million commitment to ITU Ventures III in October 2005. Of that amount, $526,000 has been drawn down.

In addition to Harvard and the pension fund for LA police and firefighters, other LPs in past ITU funds include the Colorado Public Employees Retirement Association, the New Mexico State Investment Council, Boeing, Softbank and Advanced Micro Devices.

ITU Managing Director Chad Brownstein declined a request for comment from PE Week. He also did not respond before PE Week‘s press time to an email query about the names of the three investors that the pension fund said had left.

The “team” section of ITU’s website changed between Aug. 4 and Aug. 10, according to Web pages cached by Google. Ramneek Gupta and Neel Master, who were identified as principals on the site on Aug. 4, were removed from the website as of Aug. 10. In addition, Principal Andrew Murray was not listed on ITU’s website as of Aug. 4 and an assistant at ITU said on Aug. 10 that Murray was “no longer with the firm.”

As of Aug. 10, ITU’s website listed the following team members: Brownstein; co-founder and Managing Director Jonah Schnel; CFO Steve Schneider; and Dr. Cahit Akin, whom the site says has worked with ITU since 2001. No title is listed for Akin.

ITU’s third co-founder, Adam Winnick, became a venture partner at the close of fund II in 2003. He is no longer listed on the firm’s website.

ITU tends to invest in companies spun out of universities, federal labs and corporations. The firm typically invests between $100,000 and $15 million in each portfolio company. It focuses on companies in communications and semiconductors.

The firm has had some minor success with its first two funds. ITU sold Eizel Technologies, a Carnegie Mellon University spinout that makes software for wireless devices, to Nokia for $21 million in 2004. The company had raised about $4.2 million from ITU and another investor. A few months later, ITU sold Coatue Corp., a memory chipmaker spun out from the University of California at Los Angeles in 2001, to Advanced Micro Devices for an undisclosed sum. Coatue had raised nearly $10 million. Heir Design, which raised $6 million, was spun out of the University of California at Berkeley and was sold to Xilinx in 2004.

The firm’s last exit was its sale of chip company PowerSicel to Microsemi Corp. in January 2005. Microsemi paid $5.4 million, more than double the $2.5 million PowerSicel had raised from ITU and another firm.

Its current portfolio includes Luxtera, a Carlsbad, Calif.-based developer of integrated optical components, which has raised about $45 million from such investors as ITU, August Capital Management, New Enterprise Associates and Sevin Rosen Funds; and West Covina, Calif.-based Wavestream Wireless, a provider of power amplifiers for the telecom industry, which has raised about $38 million from ITU, Anthem Venture Partners and Oak Investment Partners, among others.

ITU still maintains an office in Albuquerque, N.M., which it opened about three years ago when it become one of the founding members of the New Mexico Venture Capital Association.