Gary Morgenthaler is stepping back from a general partner position in his eponymous firm’s recently closed $400 million ninth fund. He will continue investing as a venture partner.
“He has reached a point in his career where he would like more freedom to manage his personal investments and activities,” says
Morgenthaler, the son of firm founder David Morgenthaler, joined the firm in 1989 after co-founding Ingres Corp., a relational database software company. He has focused on networking and communications startups, backing such companies as storage network company BlueArc (which is in registration for an IPO), broadband access system maker Catena Networks (which was sold to Ciena in 2004) and smart dust wireless sensor company Crossbow Technology.
Gary Morgenthaler was also a vocal participant in the Net Neutrality debate two years ago, suggesting that a possible opportunity for compromise would be allowing people to pay for better service on bandwidth intensive applications such as Skype.
The $400 million Morgenthaler Ventures fund had raised the majority of its money, $373 million, by September, before the financial crisis started in earnest. The new fund will be separate from the firm’s buyout operations, a first for the firm.
The firm, which invests in life sciences and information technology companies, expects to raise about $74 million in fees over the life of the fund, which is 1.8%, assuming a 10-year window. Among its limited partners is the University of Texas, which committed $40 million.
The firm’s previous fund, a $450 million buyout-venture hybrid raised in 2005, has seen one of its 23 portfolio companies acquired, according to Thomson Reuters (publisher of PE Week). In fund eight, about $315 million was dedicated to its venture group, according to VentureWire.
Morgenthaler Fund VII, raised in 2001, is under water, according to data from the California Public Employees’ Retirement System. The state pension plan committed $10 million to the fund, of which $8.5 million has been drawn down. Morgenthaler has returned about $3.2 million in cash to CalPERS and the cash out and remaining value of the pension fund’s investment was about $8.3 million on Sept. 30, 2007, according to CalPERS.
In addition to closing the new fund, Morgenthaler recently added Rebecca Lynn as a principal and Guido Appenzeller as an entrepreneur in residence to its tech investing team. Both are based in Menlo Park, Calif. The firm also has added Doug Treco as an entrepreneur in residence to its life sciences team. He will work from the Boston office. —Alexander Haislip