When venture market wags are asked to identify the next major firm to reduce its fund size, the trendy response lately has been VantagePoint Venture Partners. After all, the firm is currently working through a $1.6 billion early-stage fund closed in early 2000, and has invested in just a handful of deals this year.
The only problem with this line of thinking, however, is that it’s wrong.
Instead of cutting the size of its fund, VantagePoint is hoping to appease limited partners in Fund IV by loosening up its management fees, according to two sources familiar with the situation. The San Bruno, Calif.-based firm recently told investors that it would defer the fees on half of the fund for the next 18 months, with the other half being tacked onto the back-end of the carried interest.
“I kind of wish that they would just reduce the size, but at least we’re not paying for such a large fund for a while, so I guess it works for me,” says one VantagePoint investor. “I think they may revisit this in another six to nine months.”
When it was raised, Fund Four was designed to make approximately 40 investments over three years, with initial investments of between $3 million to $15 million. Specific sectors of interest included data networking, photonics, telecommunications, semiconductors and Internet infrastructure.
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