Crescendo Ventures began raising its fifth fund in late 2001, less than a year after holding a $640 million final close on its fourth fund. Limited partners balked at another new fund so quickly, saying that Crescendo was investing too fast—20 deals in 2000, including many questionable investments in telecom. Investors also weren’t thrilled that, at the time, Crescendo’s previous two funds were underwater.
In response, Crescendo initiated a complete overhaul that included partner terminations, a dozen write-offs and a partial management fee deferral. It also dropped telecom from its investment strategy, and added some additional personnel. By mid-2003, the firm had called down about 70% of its capital, but still was unable to garner much LP interest. By the end of Q2 2006, the fund was 97.5% called and still no new money was coming through the door.
Crescendo can still support existing portfolio companies via a fund “recycling” provision, but there hasn’t been a new deal in quite some time. Firm founder and managing partner David Spreng told peHUB the following in an email:
“Our current portfolio of 25 companies did almost $500 million in revenue in 2008 and is projecting over $750 million in 2009 so there is real value being created. We own on average about 18% of our companies so we feel the highest and best use our time and energy right now is helping our current portfolio companies grow.”
He also says that Crescendo plans to raise a new fund next year. It’s a line I’ve heard before from Spreng, but never say never….