Enterprise Partners Venture Capital looks like a veteran venture capital firm. It was founded back in 1985, has raised around $1.1 billion for six funds and has invested in over 150 companies. But if you scratch just beneath the surface, you’ll find that this isn’t your father’s EPVC. Only one member of the current management team was around when the firm closed its sixth fund in 2001, and the new group has so far been unable to raise a seventh.
“These things happen,” says a limited partner in Enterprise Partners VI. “It’s the typical case of a firm that strayed from its knitting, and LPs had plenty of more experienced options for that new knitting.”
The strategy shift was in terms of industry sector. EPVC had historically invested most of its money in early-stage information technology companies, with around a 25% allocation to life sciences investments. This was reflected by just one of Fund VI’s four managing directors – Drew Senyei – being focused on the life sciences sector. The other three were Bill Stensrud, Tom Clancy and Naser Pulvati (Clancy and Pulvati later left, and were replaced by Bob Conn and Carl Eibl).
By the middle of last year, however, EPVC decided to balance its sector scales. It added Kleanthis Xanthopoulos, president and CEO of public drug company Anadys Pharmaceuticals, as a managing director. Just a few months later it also hired former Advent International pro Marios Fotiadis as a managing director, and promoted entrepreneur-in-residence Krisztina Zsebo to venture partner (she remained CEO of EPVC portfolio company Celladon).
The idea was to raise a $300 million fund, with a 50/50 allocation to IT and life sciences. This seemed to make sense, as the managing director ranks were evenly split with three IT pros and three life sciences pros. But then came what turned out to be a crushing blow, when Bill Strensud left to pursue more entrepreneurial activities. Not only was Strensud the firm’s only IT partner left from Fund VI, but he also was considered the closest thing EPVC had to a rock star.
EPVC responded by drastically altering its fundraising plans, with a new $175 million fund that would focus only on life sciences opportunities. The remaining IT partners would stick around to manage the existing portfolio, which had nearly three dozen live companies.
LPs weren’t buying the new incarnation. Private Equity Insider reported last week that the La Jolla-based firm had indefinitely suspended fundraising, and parted ways with both Xanthopoulos and Fotiadis (they both remain on the firm’s website). In addition, peHUB has learned that Krisztina Zsebo is no longer considered a venture partner, while IT venture partner Erik Nierenberg is also gone. EPVC spokeswoman and principal Moya Gollaher had left earlier in the year.
Other firms have rebounded from worse, but EPVC’s path to success is unclear. Its sixth fund reportedly was underwater as of year-end 2006 – and that’s really the only team track record that the current group has to go on. It could blame some downward deals on departed partners, but that wouldn’t excuse follow-on investments. This likely leaves the firm in a wait-and-see pattern, hoping to squeeze some juicy liquidity out of the current portfolio. Not the place you want to be as a general partner.
“They have a lot of work left to do,” says another EPVC limited partner. “The firm could conceivably come back with a more traditional fund – focus on tech, with a secondary interest in life sciences – but only if they can really grind out a bunch of hits… Their real danger is that investors will just move on to other things.”
EPVC did not respond to repeated requests for comment.