Lightspeed GPs Set To Launch New Fund

Two Lightspeed Venture Partners general partners are blasting off to do their own thing, as the 34-year-old firm’s remaining GPs plan to raise their ninth fund.

General Partners Gill Cogan and Carl Showalter will assemble a new team with a “different investment strategy” than Lightspeed’s focus on early stage technology deals, according to the firm. They plan to raise their new fund by the end of the year.

Cogan has been with Lightspeed since 1990 and Showalter came aboard in 2002. Some have speculated that the pair will focus on late stage investing, but a source close to the two GPs says they want to keep a hand in early stage and that they are still developing the strategy for their new fund.

“All of the partners [at Lightspeed] will continue to work together on the existing funds and will maintain their portfolio company responsibilities,” the firm said in a prepared statement.

Lightspeed, based in Menlo Park, Calif., has eight general partners. The prepared statement says that four of the GPs-Barry Eggers, Ravi Mhatre, Peter Nieh and Chris Schaepe-plan to start raising a $400 million fund with “additional team members” this fall. (The fund will be named Lightspeed Venture Partners VII, but it will be the ninth fund the firm has raised.)

The firm’s statement did not mention the future plans of General Partners Eric O’Brien or Jake Seid, but a source familiar with the firm says that both are expected to continue as GPs in LVP VII.

PE Week sought comment from four of the firm’s general partners, but none chose to respond.

Several of the firm’s limited partners also declined to comment, including Grove Street Advisors, which invested $40 million in LVP VI (the $800 million vehicle it has been investing since 2000), and Hamilton Lane, which invested $60 million in the same fund.

Lightspeed was founded in 1971 as Weiss Peck & Greer Venture Partners. Its website says that the firm has funded more than 275 companies, including Brocade, Ciena, and FedEx. The firm invests in Silicon Valley and Israel and focuses on early stage infrastructure and enterprise software startups, as well as networking systems and services companies.

In addition to eight GPs, the firm lists five partners and one associate on its website.

General Partner Eggers has reportedly said that Lightspeed typically aims to invest up to 80% of its capital in early stage deals, but its most recent fund has veered closer to investing upwards of 30% of its capital on more established companies. Of the 38 publicly disclosed investments that Lightspeed has made from its current fund, 2 were in “seed stage” companies, 21 were in “early stage” companies, nine were in “late-stage” companies, and 22 of its financings have been considered “expansion” rounds, according to The MoneyTree Survey from PricewaterhouseCoopers, Thomson Venture Economics (publisher of PE Week) and the National Venture Capital Association.

It is important to note, however, that Lightspeed claims far more early-stage activity, blaming “stealth-mode” companies for the discrepency. According to the firm, Lightspeed has invested in 32 early-stage companies since 2002, made 11 seed or first-round investments between 2003 and 2004, and has made 8 seed or first-round investments so far this year.

Almost all of the companies Lightspeed has publicly announced investments in – including advanced materials startup SemEquip, enterprise software startup OpTier and networking gear maker Ellacoya Networks -have been follow-on rounds or late-stage financings. Though Lightspeed has a long and rich history, the performance of its most recent fund has been below average. The most recent performance data published by the California Public Employees’ Retirement System, a Lightspeed LP, shows that the firm’s 2000 fund, LVP VI, has an IRR of -17.2%, slightly lower than the average -13.3% IRR that vintage year 2000 funds are currently posting.

One company in Lightspeed’s current fund has gone public: Alliance Fiber Optic Products. After raising $34.8 million from VCs, Alliance pulled in $49.5 million in November 2000 IPO. Another one of its portfolio companies, therapeutic device startup NxStage Medical, is in registration to go public. Five startups have been acquired and three have gone out of business.

In addition to Grove Street Advisors and Hamilton Lane, other LPs in LVP VI include Denison University, TD Capital Group, the University of Michigan, Washington University, and Princess Management & Insurance Ltd.