Bay Partners has asked its limited partners to amend the terms of its current fund, so that General Partners Chris Noble and Bob Williams can transition into part-time roles.
The Cupertino, Calif.-based firm closed Bay Partners XI about a year ago with $290 million in capital commitments. It was not, however, an easy process. The firm has not yet made any distributions from its $365 million predecessor fund. Meanwhile, firm founder John Freidenrich retired during fund-raising and General Partner Loring Knoblauch resigned.
Partner Neal Dempsey said at the time that Bay Partners was in “advanced negotiations” with “a couple of senior general partners,” but no such senior hires were made. Nonetheless, limited partners such as Horsley Bridge and Paul Capital commited to fund XI, and Bay kept chugging along with five general partners: Noble, Williams, Dempsey, Atul Kapadia and Dino Vendetti.
A few months later, Vendetti left to join startup firm Formative Ventures. Bay Partners responded by promoting Eric Chin and Neil Sadaranganey to partner. They each had joined in 2005—Chin as venture partner and Sadaranganey as an entrepreneur-in-residence.
VCJ reported in September that two sources close to Bay said Noble planned to leave Bay, but Noble said via email at that time: “I am an active GP at Bay. That is the end of the story.” He declined to say if he would continue to work full time at the firm.
Stay or go?
Since then, rumors have swirled that Noble and Williams are looking to scale back. If they did, the limited partner agreement for fund XI would need to be amended because it contains a keyman provision that would be triggered if two more general partners steps down. To pre-empt such a scenario, Bay Partners has presented LPs with a proposed amendement, sources familiar with the matter told VCJ.
Dempsey declined to confirm or deny that such an amendment exists, but he did acknowledge that the firm was “planning for the future,” and that any possible changes are “not new items.”
Neither Noble nor Williams returned requests for comment.
As is the case with many vintage 2000 and 2001 funds, Bay partners X, which closed in early 2001, has not seen an exit from the more than two dozen companies it backed. Two portfolio companies have shut down. High-speed wireless data access and services startup Transat Technologies Inc. of Dallas quietly shuttered its doors in 2004 after raising $15.4 million from Bay, Intel Corp., Acorn Campus and Genesis Campus. In mid-2005, Santa Clara, Calif.-based ElectriPhy Corp., which made semiconductors for high-bit-rate broadband, shut down after failing to attract enough interest for a Series B. It had previously raised $9 million in January 2004 from Bay and individual investors.
Bay Partners X had called down 75% of its capital and had an internal rate of return of -16.5% as of Q1 2006, according to the California Public Employees’ Retirement System, a limited partner in the fund. —Dan Primack