Todd Brooks is putting on ice his plans to raise a new venture fund, following co-founder Peter Levine’s decision to become president and CEO of open-source startup XenSource Inc. in Palo Alto, Calif.
Since last year, Brooks and Levine, both former managing directors of the Mayfield Fund, were shopping around their inaugural fund, which was originally called BLX Partners. Some sources said the fund had a target of $200 million, though the partners have never confirmed the amount. But the fund seemed destined to close soon without difficulty, based on the interest level from limited partners who spoke to PE Week.
The fund was “heading toward being well oversubscribed,” according to a statement that Brooks wrote to PE Week last week.
“Over the course of the last few months, we’ve been grateful for the overwhelming interest and support for BLX Partners,” Brooks wrote. But “after much consideration, we decided that Peter’s strengths and passions were truly on the operating side, and that it was important to communicate this prior to the closing of the fund.”
Sans Levine, Brooks will now put the fund-raising on hold until he gets a new partner. “I remain passionate and focused on the fund formation process and continue my discussions with several potential investment professionals who have been under consideration as team members throughout the fund-raising process,” Brooks said.
Though the split comes at a bad time during the inaugural fund’s formation, it appears to be an amicable one.
“I’m blessed to have had multiple choices, and this was a difficult decision to leave,” Levine told PE Week.
One LP who wishes to remain anonymous says that the two GPs parted ways because Levine “is just a CEO at heart, not a VC. And becoming the head of XenSource is a chance of a lifetime,’ I guess you could say.”
Levine told PE Week that he has been familiar with XenSource since his Mayfield days. In December 2004, the company was up for Series A funding, and Levine said that he wanted to do the deal. But Mayfield passed.
Just last fall, Brooks and Levine had talked with PE Week about their plans, and Levine said they would set up shop somewhere in the Bay Area once the fund closed. “I’m having more fun than I ever have right now. We’re really excited,” said Levine last year. He added, “We don’t want to jinx anything by talking about it.”
Levine’s move to XenSource was reported first on Feb. 10 in the blog SiliconBeat, which said that XenSource had laid off close to 20 people, including Michael Enescu, its vice president of business development. It also reported that co-founder Moshe Bar resigned in October and that president Nick Gault was in charge of finding a replacement for Bar.
Ostensibly, Levine, formerly the CEO of the Mayfield-funded company Mendocino Software, is being brought in to right the company.
“I don’t read the blogs,” Levine said. “For me, the good thing is that the technical founders and the tech team – the guys who really matter – are still here and are firmly committed. We have world-class engineering talent, and will soon make a couple of announcements about expanding the business caliber of our team… Any disruption of the executive team is behind us.”
XenSource, which makes software to manage the efficient use of computing power, had an auspicious start in late 2004. Last year, it raised nearly $24 million over two rounds from Kleiner Perkins Caufield & Byers, Accel Partners, Sevin Rosen Funds and New Enterprise Associates.
When Brooks continues his efforts to raise the fund, limited partners who were interested in BLX will likely move forward with him, based on his experience and track record.
Mayfield hired Brooks in 1999 from JAFCO America Ventures, a subsidiary of Japan’s largest venture firm, where he led the telecommunications practice as managing principal. He left Mayfield in late 2003 because of “differences in investment philosophy and over the direction of the firm,” he told PE Week in September. Brooks said that he wanted to “explore other fund opportunities, including putting my own firm together.”
While at Mayfield and JAFCO, Brooks led investments in 25 companies and has enjoyed a number of big hits. His investments include fiber optics component maker Avanex, which completed a $216 million IPO in 2000 after raising more than $30 million from Mayfield, JAFCO, Crosspoint Venture Partners, Sequoia Capital and U.S. Information Technologies. Brooks led investments in Avanex initially for JAFCO and later for Mayfield, and he remains on its board.
At JAFCO, Brooks also got behind gigabit networking and switching equipment maker Brocade Communications, which completed an IPO of nearly $62 million in 1999 after raising $37 million from JAFCO, Crosspoint, Bay Partners, Mohr Davidow Ventures and several other investors. Brocade’s stock was trading at about $5 a share last week, and the stock hit a high of $150 per share in the months following its IPO.
“I returned nearly $2 billion to LPs [in realized gains; not actual returns] on about $200 million invested,” Brooks previously told PE Week.
Meanwhile, Levine, who joined Mayfield in 2002 as a venture partner and became a general partner in 2003, led seven deals for the firm, including an investment in enterprise application recovery startup Mendocino Software, which Levine incubated. He remains chairman of the Mendocino board.
Levine also led investments in software startup Centrify; and Zenprise, an enterprise software company focused on infrastructure management.
Two of Levine’s companies have been acquired: Consera Software, which raised a little more than $10 million over two years, was sold to Hewlett-Packard in February 2004. Also, data management startup Actona Technologies raised $25 million in five rounds before Cisco Systems acquired it for $84 million in cash. Mayfield led the fifth and only round in which the firm participated.
Levine left Mayfield in April 2004, several months before it wrapped up its 12th fund of $375 million.