It’s no secret that dozens of venture capital firms are fighting for their lives. It may be time to add Rustic Canyon Partners to that list.
The Santa Monica, Calif.-based firm began life with a bang, raising $500 million for its debut fund in 1999. It would later raise small vehicles — including an SBIC fund and a joint fund with Fontis — and then secured just over $200 million for Rustic Canyon III. That vehicle officially closed in October 2008, though fundraising, and investing, began in early 2007.
By May of last year, Rustic Canyon had already committed around half of Rustic Canyon III, and it began premarketing a new vehicle, but it doesn’t appear to have gotten much traction.
Now, some new departures would seem to cast further doubt on Rustic Canyon’s staying power. Most notable is partner Mark Menell, who originally joined Rustic Canyon at its inception after co-leading Morgan Stanley’s tech M&A practice. peHUB has learned that Menell, who declined comment, is now working closely with Bay Area members of Seattle-based venture firm Maveron LLC.
Menell had led some of Rustic Canyon’s higher-profile deals in recent years, including its investment in MerchantCircle, an online business directory and social network connecting businesses and consumers. The profitable five-year-old company has raised $14.3 million so far over two rounds, including from Scale Venture Partners and Steamboat Ventures.
Menell also led Rustic’s investment in Good Technology, so named last year after Motorola sold Good Technology to rival push email provider Visto, which rebranded itself as Good. Visto has raised more than $250 million from more than 20 venture firms in its roughly 15 years of operation.
Yet Menell isn’t alone is going his separate way. Longtime partner Michael Song, whose LinkedIn profile still lists him as a partner at the firm, also has left Rustic Canyon and now appears at the firm’s website under the heading “senior advisor.”
Michael Kim, who announced last December that he was leaving Rustic Canyon to launch a fund-of-funds firm called Cendana Capital, and Jon Staenberg, long a Seattle-based venture capitalist who merged his shop with Rustic Canyon in 2003 and left the combined firm two years ago, also are listed as “senior advisors.”
Even founder Tom Unterman, who did not respond to a request for comment earlier today, may be dividing his attention. At least, in February, joined by a long list of angel backers and Andreessen Horowitz, Unterman personally participated in the $1 million seed funding of Factual, a platform that invites anyone to contribute and “mash” open data on any subject.
Rustic Canyon is still investing from its 2008 fund, though the pace of new deals has slowed dramatically. This year, for example, it has disclosed its participation in just one new investment: the $10 million Series B round of Gaikai, a video game streaming service that had received earlier backing from Benchmark Capital. More common for the firm right now are follow-ons, such as its recent participation in the $6 million Series C round of Perfect Market, whose software helps publishers squeeze more money out of online content and that has raised nearly $40 million since 2005;
Rustic Canyon saw four of its portfolio companies go public in its 1999 fund; the firm also backed the online real estate exchange company LoopNet, which attracted investment from 17 investment firms and went public in 2006.
Far more of Rustic Canyon’s exits have come through mergers and acquisitions, and almost none for disclosed transaction amounts. Most recently, Rustic portfolio company InSync Software, which makes RFID and sensor-based application software, sold to an investment firm focused on RFID technology called RFID Invest. InSync had raised more than $12 million in venture funding; financial terms were not revealed.
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