MeVC Encounters More Turbulence

As if a pending lawsuit wasn’t enough, MeVC Draper Fisher Jurvetson now has lost a pair of directors.

Last night, Peter Freudenthal and Paul Wozniak resigned from MeVC Draper Fisher Jurvetson Fund I, MeVC Advisers Inc. and MeVC.com. Wozniak and Freudenthal sat on the publicly traded closed-end fund MeVC Draper Fisher Jurvetson Fund I’s board of directors and ran MeVC Advisers, which essentially served as the fund’s back office.

;I think Peter and Paul surprised everybody with their little announcement,” says John Grillos, portfolio manager and chief executive officer of the fund. MeVC.com is a portfolio company of Draper Fisher Jurvetson and was formed in 1999 to offer venture capital investments through closed-end mutual funds to individual investors. Freudenthal was a cofounder of MeVC.com.

It originally intended to raise several funds but has only formed one: MeVC Draper Fisher Jurvetson Fund I, launched in June 2000. In February of this year, the fund came under pressure from dissident shareholder Millennium Partners LP – a New York hedge fund. Millennium successfully blocked a March proxy vote that would have renewed MeVC Advisers’ contract as the fund’s investment advisor. Moreover, Millennium initiated a February lawsuit against MeVC Advisers alleging it charged the fund’s shareholders excessive management fees.

Millennium’s primary demand was a change in the investment advisor, and it looks like that is just what they will get. MeVC Advisers will discontinue its role with the fund after August 14. No new plan for the fund’s advisory has been decided yet, and MeVC Advisers is expected to continue its role until then.

Grillos says he plans to hold a meeting with the remaining staff of MeVC Advisers tomorrow morning to work out an arrangement with them for continuing operations over the next two months, and he says that he called the remaining employees. Nobody else has left the company with the resignations of Freudenthal and Wozniak.

A press release issued by the fund says that the resignations were expected as part of a reorganization that is underway. Grillos reports that there was some disagreement at the board level on the direction that the reorganization would take, and adds, “Remember, MeVC Advisers got sued by that hedge fund. Maybe that’s part of it.

He also points out that MeVC.com initially intended to raise several funds, but he says, “I raised the only fund that got raised. Once I was the only fund that got raised, [MeVC Advisers] were relegated to being my back office.” He says Freudenthal and Wozniak might have had other ambitions.

;I am committed to making this asset class work for individual investors, and there’s some things I have to work out to do that,” Grillos says. “Some eggs will get broken.

Contact Charles Fellers

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