Prism Closes Fund V with 2 Fewer GPs

Prism Venture Partners expects to announce this week that it closed its new fund, Prism Venture Partners V, with $250 million.

The fund is significantly smaller than Prism Venture Partners IV, which had more than $428 million in commitments when it closed in 2001.

But the firm insists that the retirement of one GP and the unexplained departure of another have nothing to do with the smaller fund size.

Regulatory documents that Prism filed with the Securities and Exchange Commission placed a $400 million cap on the fund, but General Partner Gordie Nye says that the firm initially sought about $350 million. He says the partnership revised its goals during the fund-raising process.

“Our fund size reflects the fact that satisfactory return multiples continue to be dampened by the weak to nonexistent IPO market,” says Nye.

He adds that while the firm told its LPs of its reduced fund size, it did not find it necessary to change its prospectus.

Duane Mason, who helped found the Boston-based firm in 1996, announced his retirement and is not a general partner in fund V. He said his decision to retire was based mostly on his age. His board seats have been assigned to other Prism partners.

David Baum also recently left the firm, but his departure has so far gone unexplained. He has been removed from Prism’s website, but was listed in SEC documents as a GP for the new fund as recently as May. “He left and we’re not saying anything more about it at this point,” says Nye

Five GPs remain: Nye, co-founder Robert Fleming, co-founder John Brooks III, Woody Benson and William Seifert.

Prism Venture Partners has steadily added new professionals since it closed fund IV. Plus, the firm expects to announce this week that a new associate, Jeff Steves, has joined the firm. Also, Mark Canha, a long-time executive consultant to the firm, has been promoted to principal.

This latest fund brings the firm’s total capital under management to about $1.25 billion.

Prism invests in business infrastructure software, communications and life science companies. It has broadened its investment scope and will be willing to seek out smaller deals with fund V than in past funds.

Nye says that Prism may do more device and novel diagnostic deals and take a greater interest in capital equipment deals. It recently closed its first deal from its new fund in the $4 million Series A round raised by Boston-based Everypoint, which provides content for cell phones.

Nye wouldn’t disclose limited partners in fund V.

But LPs in previous Prism funds include BancBoston via its fund-of-funds, the California Public Employees Retirement System, Phoenix Mutual Life Insurance Co., the University of Richmond, the University of Texas Investment Management Co. and the Wisconsin Alumni Research Foundation.

Prism’s foreign LPs have included Vencap International Fund Management Ltd. and Mitsui & Co., according to Thomson Venture Economics (publisher of PE Week).