Atlas Venture Ltd. is in the midst of some personnel “restructuring,” after closing its eighth fund well below target.
Leaving the 29-year-old firm will be Boston-based IT Partner Ahmet Ozalp and London-based IT Partner Martin Gibson. In addition, Boston-based IT Partners Eric Hjerpe and Barry Fidelman are transitioning into venture partner roles.
Atlas also has promoted life sciences pro Bruce Booth to partner, while Chief Operating Officer Jeanne Henry has retired.
All of this came soon after Atlas quietly closed its eighth fund with just $283 million in capital commitments, more than $100 million less than it raised for its previous fund. The private placement memorandum for fund VIII had a $500 million cover, but within weeks Atlas downsized the target to $400 million, according to sources familiar with the fund-raising. Atlas raised $385 million for its seventh fund in 2006.
Atlas Partner Jeff Fagnan tells VCJ that the firm opted against continuing fund-raising into the first quarter because most of the air had been sucked out of the LP market. “I know the number isn’t what we originally wanted, but I’m really proud that we closed a VC fund in this environment,” he explains.
Fagnan also acknowledges that the Atlas partnership is particularly large, with 10 active partners, but that it fits with firm’s seed/early stage strategy.
An LP who did due diligence on Atlas Venture VIII says that the firm’s predecessor fund ranked in the top quartile, but that its previous four funds had ranked in the third quartile. Fagnan does not dispute those numbers, saying that Atlas refined its investment strategy around two years ago.
Atlas reports that limited partners in Atlas Venture VIII include existing LPs, such as Kisco Management, The Kresge Foundation and Paul Capital, and new LPs, such as Franklin Park, Industriens Pensionsforsikring A/S and Meketa Investment Group.
One LP that apparently gave up on Atlas is the Pennsylvania State Employees’ Retirement System. It invested in Atlas’s fourth, fifth and sixth funds, but it did not participate in its seventh and eighth.
Performance data released by PennSERS show that Atlas’s fourth, fifth and sixth funds have performed poorly:
• Fund IV, a $404 million vehicle raised in 1999, had drawn down most of PennSERS’ $26 million commitment, but had distributed just $6.1 million as of Dec. 31, 2007, the most recent date for which data are available.
I know the number isn’t what we originally wanted, but I’m really proud that we closed a VC fund in this environment.
• Fund V, a $704.5 million vehicle raised in 2000, had drawn down nearly all of PennSERS’ $37.2 million commitment, but had distributed just $10 million as of Dec. 31, 2007.
• And Fund VI, a $600 million vehicle raised in 2001, had drawn down nearly all of PennSERS’ commitment of $24.8 million, but had distributed just $3.1 million as of Dec. 31, 2007.
Atlas’s seventh fund has invested an estimated $220 million in 39 companies, according to Thomson Reuters (publisher of VCJ). Most of that 3-year-old fund’s investments have been in the biotechnology and medical/health sectors, where it has backed 14 companies. Its second-favorite sector is the Internet, where it has backed 10 companies.
So far, fund VII has had just one exit: Portfolio company Proprius Pharmaceuticals Inc., which makes arthritis drugs, was acquired by Cypress Bioscience (Nasdaq: CYPB) for $37.5 million in cash and another $37.5 million in potential milestone payments in February 2008. Proprius had previously raised a single round of $5 million from Atlas, CDIB BioScience Venture Management, Fog City Fund, Forward Ventures and Windamere Ventures, according to Thomson Reuters (publisher of VCJ).
Atlas’s newest fund has made one investment so far. It and an undisclosed investor teamed up on a $7.4 million Series A for CloudSwitch Inc., a West Newton, Mass.-based developer of cloud computing services, on Jan. 22, according to Thomson Reuters. —Dan Primack with additional reporting by Lawrence AragonDEALWATCH: Five recent investments by Atlas Venture Ltd.
Archemix Corp._Nucleic acid-based products and services
CloudSwitch Inc._Technology enabling cloud computing services
Keas Inc._Online personal health platform.
Koodos Ltd._Online fashion retailer
Zoopla Ltd._Website for UK residential property data
Note: Investments made between Dec. 23, 2008, and Jan. 22, 2009. Sources: Thomson Reuters