No Scandal To See Here

Pete Lattman has a piece in today’s WSJ about how individuals at Insight Venture Partners made a fortune off last year’s $300 million sale of Photobucket to News Corp., while the firm’s limited partners made nothing. I love a good VC scandal, but there is much less here than meets the eye.

The facts are undisputed: Certain IVP employees and acquaintances invested $3 million for 20% of PhotoBucket in 2005, while partner Jeff Lieberman took a seat on the company’s board of directors. They did not include the deal as part of its $675 million fifth fund (it has since raised a $1.25b sixth fund), which means that IVP’s limited partners never paid in nor got paid out on what turned out to be a blockbuster investment.

Someone apparently believes this is a case of IVP partners cherry-picking a sweet deal for themselves, at least judging by the number of media outlets he/she tipped off before WSJ ran with it. Maybe a bitter LP, rival VC, passed-over entrepreneur or jilted girlfriend. I don’t know or care, because it’s a bogus accusation.

IVP says it didn’t put Photobucket into its fund because the company was far too small and early for an investment mandate that focuses on growth-stage, revenue-generating companies. This seems to square with a data search I ran on recent IVP deals, in that I couldn’t find an initial check written for single-millions of dollars. The firm did once have an early-stage practice, but most of those folks left to form OpenView Venture Partners.
The “tipster” also accused IVP of not telling Photobucket executives that the deal was not being done via the fund – a charge that Jeff Lieberman denied during a phone conversation earlier this morning (that part isn’t in the WSJ story, but PaidContent had it).

Imagine if it had invested in Photobucket and the company had cratered? Then LPs would have a legitimate gripe. As it stands, everyone seems to have acted appropriately. No harm, no foul. Guess we’ll have to wait ‘till next time…