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— Movers and Shakers —
In a disappointing first quarter for venture capital fundraising, August Capital Management LLC offered a ray of hope. The Menlo Park, Calif., VC firm raised $650 million for its balanced-stage fund, August Capital V LP, beating its last fundraising, in 2005, by $100 million. The firm, which manages $1.3 billion, boasts one of the longest track records in VC. Co-founded in 1995 by John Johnston and David Marquardt, August Capital has backed well-known technology companies including Intuit Inc., Symantec Corp., Compaq Computer Corp. and Skype Technologies SA. Its new fund is participating in the purchase of recommendation engine StumbleUpon from eBay Inc. and the $5.75 million Series A for Web publishing tool maker Pixazza Inc. We spoke with partner David Hornik about the challenges VCs face in the current economy.
The Deal: How difficult was this fundraising? David Hornik: It's as tough a fundraising climate for venture firms as it is for startups, and it's about as challenging as I've ever seen for startups. That's certainly being mirrored in the limited partner community. The reality is that the way LPs had allocated their investments across different investment classes means they are overweighted in things like venture capital and private equity because the public markets dropped so quickly. The primary differences between this fundraising cycle and the last one in 2005 were that it took slightly longer and there were some LPs who didn't have the capacity to invest. We started fundraising after Thanksgiving, and we had hoped to finish before the end of the year. Obviously, that process got stretched out a bit. Did you need to find new limited partners? We did bring in some new LPs, but the percentage of new LPs is quite small, and they were of the same top tier of LPs. The number of individuals or entities who can reasonably take on the risk of venture firms, who understand the business and have the right set of expectations for the time frame on returns, is a relatively small universe. What role did August's track record play in its ability to raise funds? Nothing replaces success like success when it comes to fundraising. Despite the warning that past performance is no indication of future performance, LPs use past performance as their first criteria. Most of our LPs have a long history with us, and no August fund has ever lost anyone money. Does the current economy offer opportunities for the fund to exploit? We were part of the syndicate that took Seagate private, and that was an interesting opportunity that existed only as a result of that point in time in 2000. We look forward to seeing other opportunities like that. |
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