Accel Trims Focus, Staff Changes Result –

PALO ALTO, Calif. – Accel Partners’ last health-care specialist is planning to leave the firm sometime in the first half of the year because Accel has all but completely turned away from the medical sector.

But while Gene Hill will resign from Accel, Mitch Kapor, founder of Lotus Development Corp., will be settling in as a new Accel partner.

Since joining the increasingly information technology-oriented Accel in 1994, Mr. Hill has worked on health-care information-technology and health-care services investments. Mr. Hill opted to leave the firm last fall because it decided to reduce its involvement in health care.

Accel decided in September to discontinue health-care services investing to focus exclusively on Internet, software and communications investing, said Managing Partner Jim Breyer. The firm still will consider health-care information-technology deals.

“We have not made a new health-care investment (in 1998), and as we looked forward, we believed that continuing to refine our focus in the areas of specialization made a great deal of sense,” he said.

Accel decided to increase its IT-focused staff by adding Mr. Kapor and also has plans to add more associates. Mr. Kapor, an Accel L.P. for five years, designed the Lotus 1-2-3 software and sits on the boards of UUNET and RealNetworks. He also was co-founder of the Electronic Frontier Foundation, a non-profit organization dealing with Internet-related public policy.

“I’ve been investing as a solo investor for a number of years, and I really wanted to work in more of a team environment,” Mr. Kapor said, adding that he brings experience in building and backing companies.

Mr. Hill had been the sole health-care partner at the Silicon Valley firm for more than a year. Accel stopped backing biotechnology and medical-device companies about four years ago, prodding biotech-oriented General Partner Paul Kingenstein to depart in 1995. General Partner Luke Evnin, who focused on biotech and medical devices, left in 1997 for similar reasons (VCJ, March 1998, page 5).

Accel had invested only about 10% in the health-care sector from 1994 to 1998, Mr. Breyer said. At the pinnacle of its health-care investing in 1992 and 1993, the firm put about 15% of its disbursed capital in the sector, he said.

“We believe critical mass is essential if we are to generate superior returns over the long run,” he added. “Having a solo practitioner in a segment that in many ways is unrelated to the other core parts of the business is simply not an optimal organizational model.”

While Mr. Hill remains undecided about his next professional endeavor, he has begun discussions with potential co-managers and limited partners about raising his own health-care fund with an IT focus.

Mr. Hill also is thinking about working for an unnamed buyout firm managing a subsidiary health-care vehicle devoted to smaller deals. The departing general partner also has the option of joining another established VC firm, although he is unlikely to do so given that diversifying venture firms are increasingly shifting away from health care, he said. Before becoming a venture capitalist, Mr. Hill worked on the operating side of health- care companies.