BlueRun-ning Out of LPs and Personnel

Challenged by the loss of several heavy-hitting limited partners, sources tell peHUB early-stage tech investor BlueRun Ventures—formerly the investment arm of now-hobbled handset maker Nokia—is struggling to raise a new fund.

The VC’s attempt to raise a fund earlier this year was rebuffed by several LPs, including existing investors Alpinvest and Nokia, and even an attempt to secure a vehicle half the size of what BlueRun did in 2008 may be out of its grasp, three sources said. In May, sources said, BlueRun was marketing a fund for about $150 million, however, they added, it is not likely the VC will raise a fund that size absent new backers.

Even if BlueRun does reel in another fund, its GPs may have to scale back expectations. According to confidential documents distributed to BlueRun investors in February 2008, the VC’s fund was marketed on preferential terms for its leadership. Fund documents state managers “will receive an annual management fee equal to 2.5% of the partnership’s committed capital.”

While the firm’s senior leadership remains intact, BlueRun has experienced turnover since its most recent fund was marketed—notably in China, where it has seen multiple staff departures. The VC no longer has offices in Israel and India, a source noted; its Finnish office is no more. Most of the principals listed on BlueRun’s 2008 fund documents are no longer with the VC. Vineet Buch is now with Google; Sasha Mirchandani is listed as a co-founder of Mumbai Angels; both Weidong Qu and Ding (Mike) Gang are no longer listed on the firm’s site.

Some of the investment partners listed in BlueRun’s 2008 documents have also departed. Sujit Banerjee is now a managing director with Element Partners; Yossi Hasson is gone, as is Andrew Chen.

The VC has made very few investments this year and sources that spoke with peHUB said BlueRun is nearing the end of its funds from its 2008 vehicle. At the time BlueRun was marketing the 2008 fund, it was seeking $350 million, according to documents provided to peHUB—however, according to Thomson Reuters data, the fund only closed $240 million. It is said the VC’s international expansion plans were in part fueled by the expectation of a bigger close than its fourth fund would actually provide.

Additionally, according to Thomson Reuters data, the VC closed a $315 million fund in 2005 and while still under the Nokia brand, raised $150 million for its first fund in 1999 and $500 million for a second vehicle a year later.

BlueRun Ventures IV has an IRR of 33.29, according to figures posted online by pension CalSTRS dated Sept. 30, 2011. Additionally, the CalSTRS document states, BlueRun Ventures, the vehicle with a 2005 vintage, has underperformed with an IRR of 4.01. However, from BlueRun’s 2005 fund, some investments, like navigation service provider Waze, remain unrealized.

BlueRun Ventures began as Nokia Venture Partners in 1998, and over the next decade the strategic continued to be a major LP. According to documentation provided to peHUB, BlueRun told LPs in 2008 all of its active limited partners returned for its fourth fund. It is not clear whether other LPs like the Kaiser Foundation and CalSTRS will return for another vehicle.

The VC’s strategy is increasingly gearing toward mobile products, and, BlueRun is still pursing a fifth fund, several sources said.

peHUB reached out to BlueRun for comment; the VC did not respond.

Image Credit:

ATTENTION, FUNDRAISERS. Don't miss our 10th annual PartnerConnect West on Oct. 9-11 in beautiful Half Moon Bay, California. More than 400 PE, VC and real estate GPs, LPs and service providers are expected to attend for fundraising, deal-making and golf. CLICK HERE FOR DETAILS!