Like many VC firms feeling the pain of a shuttered IPO market, a dramatic slowdown in M&A, and acutely cash-conscious LPs, Palo Alto-based Labrador Ventures is suspending any efforts to raise a new fund.
Asked about the decision, partner Larry Kubal told me that “Labrador is not currently raising a fund while working for exits from LV V, our 2004 vintage fund. As you know, the exit market — or lack thereof — has lengthened the road from early stage investment to exit. The prospects look great for LV V and we want realized winners before we fundraise for LV VI, particularly given the current economic environment.”
Kubal says Labrador never entered formal “fundraising mode.” Rather, he says, “we spoke with a number of friendly current and interested LPs to test the waters,” and afterward, the “internal consensus was to not get distracted in a tough fundraising environment when we did not have major exits from the current fund.”
Instead, says Kubal, the partnership is focusing on what he calls a “spectacular portfolio of companies — likely [one that will result] in our best fund to date.”
Labrador’s fifth fund has backed 33 companies, including music discovery site Pandora, Shot Spotter, which manufacturers gunshot positioning systems, and M15, a Sunnyvale, Calif., startup that makes anti-spyware security appliances.
Labrador, as with many of its peers, has had its ups and downs over the last decade. Between its fifth fund, which closed with $90 million in 2004, and its fourth fund, which also closed with $90 million in 1999, the firm has not had a portfolio company go public, and it has seen a number of its portfolio companies acquired for nominal amounts. For example, chat startup Proficient Systems raised $21.8 million, including from Kinetic Ventures. It then sold in 2006 to another chat technology company, LivePerson, $17 million in common stock. Infrastructure software startup Atesto Technologies, which raised $18 million, including from Draper Richards, sold its intellectual property in 2003 to a French company, then closed its doors.
Labrador, founded in 1989, has enjoyed some home runs, however. The firm was an investor in the application monitoring company Jareva, which raised $23 million from seven venture firms before being acquired by Veritas Software Corp in 2002 for $537 million.
Labrador also backed hardware and software startup InfoGear, acquired by Cisco Systems in 2000 for $300 million in stock after raising $26.8 million from 13 firms. And Labrador, along with three other firms, invested alongside Draper Fisher Jurvetson in the Web-based email startup Hotmail. The company raised just $9 million before Microsoft acquired it for roughly $400 million in 1998.
Labrador Ventures is managed by three partners: Kubal, once a management consultant at Booz, Allen & Hamilton, Stuart Davidson, who worked in the past for MCI Communications and Warner Communications, and Sean Foote, previously a management consultant at Boston Consulting Group.