Ten-year-old Worldview Technology Partners is calling it a day as the firm has withdrawn plans to raise $275 million for its fifth fund after nearly a year’s worth of effort at fund-raising, according to three sources.
One source says the firm had secured commitments for $100 million to $150 million for fund V, but that co-founder and General Partner James Wei held off on a first close. Among the commited LPs was the Pennsylvania State Employees’ Retirement System, which earlier this year approved $25 million for the fund. Wei told his partners several weeks ago that he was looking at another opportunity (which ultimately fell through), so the firm decided to cease raising the fifth fund, the source says.
Wei declined to comment and the Palo Alto, Calif.-based firm’s other partners did not respond to VCJ’s messages seeking comment.
Says another source close to the firm: “This has been some time in coming. There’s been a lot of turnover at the firm.” Among those to have left in recent years are General Partners John Boyle, Ajit Shah and Terence Tan; Associate Christopher Chu; and Principal Jeb Miller. Worldview’s newer members include General Partners Irwin Gross, an attorney with Wilson Sonsini Goodrich & Rosati who joined Worldview in June 2004, and Pete Goettner, who founded the e-learning software startup DigitalThink and came aboard in June 2003.
Beyond what some have viewed as a revolving door at Worldview, its track record hasn’t helped much, either, observes another source familiar with the situation. The firm’s emphasis has been on networking and telecommunications equipment, two areas that took a severe beating when those industries collapsed. “Its ’99 and 2000 funds are deeply under water,” the source says. “So not only were potential LPs unenthusiastic, but the people who are there have no prospect of getting carried interest. They’d actually have a better chance of making money somewhere else.”
This has been some time in coming. There’s been a lot of turnover at the firm.
Worldview IV posted a negative internal rate of return (IRR) of 9.2% at the end of 2005, according to performance data from the California Public Employees’ Retirement System (CalPERS), a Worldview LP. That was an improvement from the negative 21.2% IRR posted by Worldview IV in June 2004, but it falls short of the performance of other 2000 vintage funds. Thomson Financial (publisher of VCJ) reports that the average IRR for a 2000 vintage fund was negative 5.2%, as of March 31, 2006.
As recently as last November, Worldview appeared to be in trouble as co-founder and General Partner Mike Orsak was transitioning to a part-time role. At the time, he wrote to VCJ: “I am not obligated to generate lots of deals going forward. Probably one deal a year [I’ll do].” He had also said at that time that he had “no plans to leave [Worldview] or do anything else.”Last winter, the firm also said it was scaling back its Tokyo office. Once run by General Partner Susumu Tanaka and Partner Yasuharu Watanabe, Tanaka said that he was transitioning into “chairman of Japanese operations,” a role that would allow him to segue into retirement. As of early August, Worldview’s website has not reflected either change.
What becomes of Orsak and the rest of the team remains to be seen. They will continue to manage investments from the firm’s previous funds. If they are able to generate a hit or two in the next couple of years, there’s a chance that some of the team members will go back out and try to raise a new fund, says a source close to the firm.
Worldview had no trouble raising its previous fund. On the heels of raising a $475 million third fund in 1999, the firm raised $1 billion for its fourth fund one year later from such LPs as CalPERS (through Grove Street Advisors), FLAG Venture Partners, Hewlett-Packard, Horsley Bridge Partners, IBM, Invesco and Knightsbridge Advisors. Though it hoped to deploy the money within the next three years the firm scaled the fund back twice. Initially, it was cut to $750 million and eventually to $600 million as the firm acknowledged that it was seeing fewer quality deals.
Of the 34 companies in fund IV tracked by Thomson Financial, 19 remain active, three are out of business and 10 were acquired. Only three of its investments were acquired for more money than what they raised: IntruVert Networks sold for $100 million after raising $40 million from Worldview and other investors; Catena Networks raised $193 million and sold for $466 million; and FineGround Networks was acquired for $70 million, or more than 3X the $21 million it raised in venture funding. (Thomson does not track what percentage of the company its venture investors owned.) —Constance Loizos