Lightspeed Does Right

Lightspeed Capital Partners has (belatedly) done the right thing, vis-à-vis its distribution of Riverbed Technology stock. The Silicon Valley firm yesterday posted the following comment here at peHUB:

“Lightspeed Venture Partners is an LP-friendly firm that operates according to high ethical and professional standards. We prefer not to comment publicly about limited partner matters. However, given the discussion here surrounding our recent stock distribution of Riverbed, we felt it was important to set the record straight.

The distribution of Riverbed stock was issued upon the opening of the directors’ trading window with a distribution price calculated according to our LP agreement. The General Partner did not receive any carried interest distribution. Subsequently, as the stock settled out at a significantly lower price than the distribution price, we made an adjustment to compensate our LPs for the difference.”

I followed up with Lightspeed partner Jeremy Liew, for clarification on the issue of the GP not receiving any carried interest distribution. He responded with the following:

“To answer your question, as you know, there is often a difference between when GP carry is earned and when it is paid. The GP was not paid any carry on this distribution. Furthermore, we made an LP-favorable adjustment to GP carry earned. The feedback we’ve heard from LPs has been extremely positive.”

In other words, the fund is either (A) Underwater, (B) Around water-level, but the GP is still over-distributed or (C) Above water, with the GP building in some cushion in case of subsequent losses.

But that doesn’t really matter — the important thing is that the issue has been resolved fairly. Kudos to all involved.