A Venture Firm Winds Down (the Right Way): Say Adieu to Levensohn Venture Partners

Pascal Levensohn always has been a particularly thoughtful VC, so it’s no surprise that he’s approaching the wind-down of his 15-year-old firm with a reasoned explanation. Below you can read a note authored by Levensohn this morning, and sent to peHUB.

Not cited is whether or not the decision had to do with LP reaction to a possible fourth fund, which was rumored to have been in the works.

San Francisco-based Levensohn Venture Partners is a San Francisco-based firm that has made early-stage investments in the digital media, security and demand-side cleantech space.

Venture Capital Journal subscribers can read an interview with Levensohn and get more detail about the firm’s latest fund here.

Here’s the letter:

I am writing to let you know that Levensohn Venture Partners is not going to raise a fund for the foreseeable future. This decision is based on gathering information from our existing, as well as prospective, investors. All of us believe that our efforts are best concentrated on achieving results from our existing portfolio and maximizing returns for our Limited Partners. Since late 2008 I have publicly expressed my concerns about the risk-return profile of early stage venture investing given the well-documented challenges for liquidity in the U.S. public equity markets for emerging growth companies. The environmental situation has factored into my decision.

As a firm, we remain in a strong position to continue both our board level guidance and financial support of existing portfolio companies. Although the timelines to liquidity remain difficult to predict based on market-level challenges, we are confident in the underlying strength of our remaining investments and in their ability to achieve significant results.

All four LVP partners currently plan to remain engaged with and serve as directors on the boards of their current companies to position each investment for successful liquidity events over the next several years.

In addition to overseeing our existing portfolio companies, I have decided to ramp up the strategic services that I have continuously provided to a select group of family office and institutional clients through Levensohn Capital Advisors LLC (LCA) since LVP’s inception, expanding LCA into a new Strategic Services business unit at Presidio Financial Partners, effective April 1.  Presidio is a thirteen-year old wealth management advisory firm based in San Francisco.   These high impact services, which are custom designed for high net worth families and institutions, include the implementation of best governance practices, leadership development, fiduciary conflict resolution, and operating business optimization.

Steve Reale, my partner at LVP, will also be part of the Strategic Services professional team at Presidio. The LVP professional team has a well-established relationship with Presidio as Mark Guinney, Managing Director and Head of Research at Presidio, continues to serve on the LVP Advisory Board, which he has done since LVP Fund III’s inception in 2004.

While the liquidity bottleneck that has negatively impacted the venture capital industry shows some signs of thawing, we believe the U.S. equity capital markets remain systemically challenged for emerging growth companies. We have felt the impact of these issues in our own portfolio as companies that could have gone public in past markets have been forced to wait, delaying the ability for these companies to leverage the significant marketing as well as financial benefits of going public.  The ripple effect of this situation through the overall venture industry has reduced the ability of limited partners to make new commitments to high risk, illiquid assets and skewed the risk/reward equation for the venture asset class. We believe this is a very troubling market-level problem that underlies the decreased attractiveness of the venture asset class for investors evident from the industry’s continuing contraction.  In my view, this will persist until structural market changes occur that restore liquidity through IPOs in the U.S. or allow U.S. companies to access offshore public equity markets more easily.