Worldview To Wind Down

Worldview Technology Partners is calling it a day, PE Week has learned. After nearly a year of trying to raise $275 million for its fifth fund, the Palo Alto-based venture capital firm has withdrawn the offering, according to two sources.

One of Worldview’s co-founders declined to comment and the firm’s other partners did not respond to PE Week’s messages seeking comment.

Says one source close to the firm: “This has been some time in coming. There’s been a lot of turnover.” Among those who 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.

Worldview’s 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 1999 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.”

As recently as last winter, Worldview appeared to be in trouble. It was then that PE Week reported that co-founder and General Partner Mike Orsak was transitioning to a part-time role. At the time, he wrote to PE Week: “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.”

At around the same time, Worldview also conceded that 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.

Worldview’s website has never reflected either change.

The inability to even hold a first close on Fund V contrasts with the success of Worldview’s previous fund, which raised too much money. 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 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 (publisher of PE Week), 19 remain active, three are out of business and ten were acquired. Only three of its investments were acquired for more money than what they raised. They are IntruVert Networks, which 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 nearly 3X the $24 million it raised in venture funding. (Thomson does not track what percentage of the company its venture investors owned.)

One company in Worldview’s Fund IV portfolio has gone public, Washington, D.C.-based high-speed Internet provider Cogent Communications, which raised $261 million from 15 institutional and individual investors over seven rounds before being taken public in 2002. (Worldview participated in the company’s fourth round.)

Asked to confirm that Worldview had decided to scrap its attempts to raise a fifth fund and to discuss its partners’ plans going forward, firm co-founder Wei emailed: “I’m on vacation until August 7th. Would be happy to connect then.”