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Costly Failure of Wedding Photo Company Bella Pictures Bruises Foundation Capital’s Image

Bella Pictures, a wedding photography and videography service, lost its backers more than $58 million, according to sources and federal filings.

Revelations of the company’s fire sale are a black eye for Foundation Capital, its primary backer, which is pre-marketing a seventh fund in hopes of raising $750 million. Before it was sold earlier this year, Bella had raised $59.7 million in venture capital, including an estimated $36 million from Foundation, according to Thomson Reuters (publisher of peHUB). The company’s other backers included Angels’ Forum, the Halo Fund, TPG Growth and individuals, Thomson Reuters reports.

After years of hemorrhaging cash, Bella Pictures was dealt in January to CPI Corp., the St. Louis-based photography service that operates in major retail outlets like Sears. California-based Bella sold for less than $1 million, according to paperwork submitted to regulators by CPI and a copy of the asset purchase agreement between CPI and Foundation Capital IV, which was obtained by peHUB. Later, the company’s earliest investors were told they would receive no compensation, but were rebuffed by Bella executives when they sought an explanation, one of those investors told peHUB.

Bella Pictures ambitiously tried to conquer the fragmented $4 billion wedding photography market with 150 photographers in more than a dozen cities, but the company continually lost money. The company remains active within CPI Corp., and Bella Pictures’ website remains operational.

“Series A and B investors got totally wiped out,” said one backer. “They didn’t get a cent.”

The source said Foundation Capital acquired a portion of Bella Pictures’ debt and later declined to provide the company with further funding, forcing its sale to CPI. A source familiar with the deal said the sale was done via an assignment for the benefit of creditors (ABC).

The amended 8-K filing by CPI Corp. states that the company “issued to [Foundation Capital IV] Class A Units in Bella Pictures, representing a 5% equity interest in Bella Pictures and worth, at the time of the transaction, about “$40,000, estimated using a discounted cash flow analysis.” Based on that model, the total value of the company at the time of the deal was less than $1 million. To sweeten the deal, the seller chipped in another “approximately $1.4 million in cash,” CPI reported in the filing (no party was specifically named for providing the additional capital).

Although TPG Growth and Angel Network were among the other investors that backed Bella Pictures, they aren’t mentioned in the SEC documents. TPG Growth invested an estimated $14.1 million over several rounds, according to Thomson Reuters.

Leading up to its sale, Bella lost more than $35 million, according to the CPI filing. The company “incurred losses since inception and incurred net losses of $16,985,411 and $18,550,382 for the years ended December 31, 2009 and 2008,” CPI reported.

Some portfolio failures are difficult to miss, like Solyndra’s. The solar company was a political lightening rod, because of its federal funding, and made headlines from coast to coast when it went under. Other flops, VCs can pretty much just sweep under the rug (unless one of the backers contacts the press). Bella Pictures is gone from Foundation Capital’s Web site. It appears the wedding videographer has been scrubbed from the VC’s history. Foundation’s general partners declined to comment for this piece. E-mails sent to Bella Pictures employees in Texas and California bounced back.

To be sure, Foundation Capital has had its share of wins, previously backing Netflix and, more recently, funding startup hits like Airylabs, Chegg and Silver Spring Networks. Its planned $750 million fundraising (the same amount it raised for its sixth fund) reflects ambition and confidence that LPs will back it again — even in a difficult fundraising environment.