In arguably the most significant wholesale exodus the VC industry has seen since the formation of Redpoint Ventures last year, the executives with Weiss, Peck & Greer Venture Partners have left the 30-year-old firm to start a new company named Lightspeed Venture Partners.
Although the impact of the move – which has actually been in the works for several years – on New York-based investment management firm Weiss, Peck & Greer LLC is still unclear at this time, it is improbable that Lightspeed itself will be feeling any departure hangover.
Indeed, the venture outfit has already closed on $1 billion for its first fund and made a handful of investments, each of which was officially identified as a Weiss, Peck & Greer Venture Partners deal when originally announced. It is also prepping an entrepreneurial side fund.
“Given the current environment with so many funds out there, we felt that it was important to offer some additional business services [such as marketing, recruiting and operations] and that we could articulate everything better under a new umbrella,” said Chris Schaepe, general partner with Lightspeed.
Where Do The Orphans Go?
Overall, the new firm will invest between $15 million to $20 million per deal in early-stage communications, Internet-specific and software companies.
It will not, however, provide follow-on capital for existing Weiss, Peck & Greer Venture Partners portfolio companies. Instead, any additional capital will come out of the old vehicles – now managed by Lightspeed – even though they will neither make new investments nor be renewed.
“[The Weiss, Peck & Greer] funds are 10 year funds, the last of which was just raised in 1999, so I’d expect they’ll keep providing capital for another two to three years,” said Barry Eggers, general partner with Lightspeed.
As for what happens to the existing Weiss, Peck & Greer Venture Partners LPs, Eggers said that every one of them has been incorporated into the new offering, including Weiss, Peck & Greer LLC itself. He added that several new investors have also joined up. The new fund has a 25% carried-interest structure.
“They key thing with Weiss, Peck & Greer was that they had some very prominent clients, people who they managed money for, and we continue to have those people with us,” Schaepe said.
Living Up To Its Name
True to its moniker, the new firm has not been shy about making new investments. Among the most notable deals was an investment in a $27.5 million Series C deal for Alliance Fiber Optics Products Inc., a Sunnyvale, Calif.-based fiber optics components firm which followed up on the deal by filing S-1 registration papers with the SEC earlier this month.
Other Lightspeed investments – all of which were sneakily presented to the media as being made through Weiss, Peck & Greer Venture Partners funds – include deals for Glen Burie, Md.-based iPhotonics Inc., French firm Teem Photonics, Southborough, Mass.-based Storability Inc. and Iris Group.
In addition, the firm has also made a number of follow-on investments from the Weiss, Peck & Greer Venture Partners funds since making the internal switch. According to our VentureXpert database, those companies most likely include Extraprise Group Inc., Nishan Systems Inc., Portera Inc. and Times Ten Performance Software Inc.
“The investment approach is going to be very similar to what we were doing before,” Eggers said. “Some investment areas we [participate] in may not necessarily be new, but just more capital intensive like telecom has become.”
Moreover, the firm has also made an effort to ramp up its value-added legitimacy by hiring a trio of professionals to help portfolio companies along. Tom Barton, formerly senior vice president of client services with Red Hat, will join as a venture partner; June Bower, recently head of corporate communications for Cisco Systems Inc., has joined to lead Lightspeed’s marketing efforts; and former Spencer Stuart Principal Margaret King will oversee recruiting and human capital needs for Lightspeed and its portfolio companies.
Not All About The Benjamins
In addition to Lightspeed’s $1 billion of available investment capital, the new company has also formed a charitable initiative named Lightspeed Bright Futures. The vehicle is an ongoing partnership with Plugged In and OpNet, a pair of nonprofit organizations working to bridge the digital divide.
Under the program, Lightspeed will invest a pair of $100,000 contributions on behalf of the organizations into Fund I.
“Bright Futures comes from both the notion of giving something back to the community and the simple fact that there aren?t enough technical people out there,” Schaepe said.