Tale of Two Firms: Split Rock Soars, Vesbridge Slumps

Major update after jump Split Rock Partners this morning announced that it has raised $300 million for its second fund, which will continue to focus on early-stage IR and medical device opportunities in the Midwest and on the West Coast. It was by all accounts a successful fundraise, with all of its first fund LPs returning. That includes insurer St. Paul Cos., which used to hold Split Rock as a captive fund named St. Paul Venture Capital.

Actually, that’s not the complete story. St. Paul VC was actually spun out into a pair of independent firms in 2004. Split Rock was one, and the other was called Vesbridge Partners. The new firms were differentiated in two ways.

The first was geographical. Both firms had offices in Minneapolis, but Split Rock’s satellite was in Menlo Park, while Vesbridge’s was in (my hometown of) Westborough, Mass. That basically meant that Split Rock would invest middle-west, while Vesbridge would invest nationwide with a ground presence on the East Coast. The other difference was in terms of investment sectors. Split Rock wanted to focus on both IT and healthcare, while Vesbridge was dedicated to tech opportunities like early-stage networking and Internet infrastructure.

It was — and is — amicable, with Vesbridge even sending its former colleagues a previously-commissioned portrait of the Split Rock Lighthouse on Lake Superior. All well and good, except for one big problem: Vesbridge couldn’t raise its fund.

While Split Rock breezed to $275 million for its debut vehicle, Vesbridge struggled. It had received a $50 million cornerstone commitment from St. Paul Cos., but gained little traction toward its $250 million target. One early problem was that managing director Bill Cadogan (former CEO of ADC Telecom) soon agreed to become chairman and interim CEO of Mahi Networks. That company would fail, but he didn’t end up returning fulltime to Vesbridge. Moreover, fellow managing director Rick Boswell announced his plans to scale back his activities in preparation for retirement. LPs began balking, and it can sometimes be very hard to get them back.

Vesbridge eventually closed the fund out with just around $60 million, including the St. Paul money and a bit of endowment capital. It’s done a bunch of deals (and even has three sales), but still seems to be struggling.

The latest problem is the pending departure of principal Danny Klein, who will join Hunt Ventures in Dallas next month. That leaves Vesbridge without any full-timers investors on the East Coast (office now in Wakefield, MA), and only two full-timers in general (senior MDs Zenas Hutchinson and Jeff Hinck). Whole thing is kind of sad, as I like both Hutchinson and Hinck (even though I’ve been unable to reach them for this story).

Never say never about resuscitation of a VC firm, and that goes double for a firm like Vesbridge without any portfolio blow-up baggage. It might even have some brand new LP commitments lined up. But, until I hear otherwise, Vesbridge sadly lands on my unofficial list of the walking dead…

Update: peHUB has learned that Jeff Hinck recently joined El Dorado Ventures as a partner. His first day was Monday. That basically sticks a total fork in Vesbridge. Still awaiting a call from Jeff or Zenas to explain plans for existing Vesbridge portfolio companies.

Update II: El Dorado Vesbridge has sent over the following statement, on behalf of Jeff Hinck: “Vesbridge I is almost fully invested and will continue to invest and make follow-on investments with Jeff continuing in his role as a Vesbridge Senior Managing Director and serving on his current boards. Meanwhile, Jeff is transitioning to El Dorado Ventures and is helping to invest EDV’s current fund, EDV VII and will be part of EDV going forward. No decision has been made about Vesbridge’s longer term future.”