CRV Nears New Fund Close

Charles River Ventures recently held a $186 million first close on its 13th fund, with a final close on just over $275 million scheduled for early March. And it’s a good thing too, because it would have run out of money otherwise.

CRV raised $250 million for its 12th fund in December 2003, but didn’t actually crack it until the following July. The bi-coastal firm then began making disbursements at a fairly steady pace, and eventually targeted Q1 2007 (i.e., now) as the start-date for its next fund-raising drive. But deal-pace slowed in early 2006, which prompted CRV to push back its target to Q3 2007.

Then, just as quickly, deal-pace sped back up. In fact, the capital spigot flowed so fast that CRV began worrying that it could soon run out of new investment dollars. The situation became acute by last October, when it became clear that the accounts would be dry by mid-January. The firm explained the situation to LPs during its annual meeting last November, and sent out PPMs with a $275 million cover price by the second week of December. In its pitch, it asked as many LPs as possible to make commitments by year-end, with the understanding that some LPs would need to wait until 2007 because of calendar allocation issues.

Not only was the process accelerated, but the restrictions were fairly tough. CRV put a $12.5 million cap on all LP commitments, in order to accommodate as many LPs as possible. This was the same ceiling it had used with its $250 million Fund XII, with the extra $25 million in wiggle room used to help certain LPs increase their stakes closer to $12.5 million. For example, certain LPs with $3 million commitments to Fund XII got to put $5 million into Fund XIII.

CRV continued its band on public pensions, but only in part due to FOIA issues. The bigger issue, sources say, is that CRV simply has too much LP interest than it can handle. Now I know some of you are probably thinking: “Wow, who at CRV fed you that?” – but the reality is that CRV raised $1.2 billion for a fund in early 2001, and had to make severe LP cuts in order to raise subsequent vehicles at sub-$300 million. Public pensions were among those who got cut, but not the only ones…

The primary partners on CRV XIII are Izhar Armony and Bruce Sachs in Waltham, and Bill Tai and George Zachary in Menlo Park. Chris Baldwin will not be participating on Fund XIII, but will continue to honor his Fund XII commitments (including board seats).