Enterprise Partners halts raising fund VII

Enterprise Partners Venture Capital has put off raising a new fund. Only one member of the current management team was around when the firm closed its sixth fund in 2001, and the new group has so far been unable to raise a new fund.

As first reported in October by Private Equity Insider, EPVC has indefinitely suspended fund-raising for its seventh fund. EPVC did not respond to repeated requests for comment.

“These things happen,” says a limited partner in Enterprise Partners VI. “It’s the typical case of a firm that strayed from its knitting, and LPs had plenty of more experienced options for that new knitting.”

The firm—which was founded in 1985 and has raised about $1.1 billion for six funds—had planned to raise a $300 million fund, with a 50/50 allocation to IT and life sciences. This seemed to make sense, as the managing director ranks were evenly split with three IT pros and three life sciences pros. But then Bill Stensrud, who joined the firm in 1997, retired at the end of 2006 to pursue entrepreneurial activities. Not only was Strensrud the firm’s only IT partner left from fund VI, but he also was considered the closest thing EPVC had to a rock star.

EPVC had historically invested most of its money in early stage information technology companies, with about a 25% allocation to life sciences investments.

Cool reception

The firm could conceivably come back with a more traditional fund, focus on tech, with a secondary interest in life sciences, but only if they can really grind out a bunch of hits.

Anonymous EPVC limited partner

EPVC responded to Stensrud’s departure by altering its fund-raising plans, with a new $175 million fund that would focus only on life sciences opportunities. The remaining IT partners would manage the existing portfolio, which had nearly three dozen live companies. LPs weren’t buying into the new incarnation. Private Equity Insider reported that the La Jolla, Calif.-based firm had parted ways with both Managing Partners Kleanthis Xanthopoulos and Marios Fotiadis (both remain on the firm’s website). In addition, VCJ has learned that Krisztina Zsebo is no longer considered a venture partner, while IT Venture Partner Erik Nierenberg is also gone.

EPVC spokeswoman and Principal Moya Gollaher had left earlier in the year.

“They have a lot of work left to do,” says another EPVC limited partner. “The firm could conceivably come back with a more traditional fund, focus on tech, with a secondary interest in life sciences, but only if they can really grind out a bunch of hits. Their real danger is that investors will just move on to other things.”

EPVC raised its sixth fund in 2001. That $ 353.5 million vehicle has invested in 43 companies to date, according to Thomson Financial (publisher of VCJ). Of that number, six have been acquired, one has gone out of business and two have gone public—gene therapy company Targeted Genetics Corp. (Nasdaq: TGEN) and DragonWave Inc., a wireless networking product maker that IPO’d on London’s Alternative Investment Market.

LPs in EPVC’s sixth fund include Columbia University, General Motors Investment Management Corp., the Illinois Municipal Retirement Fund, IBM, Nassau Capital, the Orange County Retirement System, SBC Communications, the State Universities Retirement System of Illinois and Yale University, according to Thomson Financial.—Dan Primack