In the words of Kenny “The Gambler” Rogers, you’ve got to know when to hold em and know when to fold em.
Rogers may have just been singing about a poker game, but venture capitalists from Silicon Valley to Silicon Alley are faced with a similar dilemma.
Rather than pulling the plug on souring investments and salvaging what’s left of their investment, some venture firms are raising supplementary or annex funds to bail out heavily weighted Internet portfolios after running short of cash for follow-on investments.
Firms such as New Enterprise Associates, Accel Partners and Enterprise Partners have recently gone back to their limited partners to ask for even more money to help prop up waning investments. In a similar effort, Battery Ventures is reportedly asking its investors for permission to reinvest profits from its fund instead of distributing it to LPs.
All of these pleas are, of course, being met with negative reactions and outright rejections from LPs – who run the risk of being cut out of future funds by declining to pony up the additional money.
In this month’s cover story, Senior Editor Carolina Braunschweig explores the reasons behind the need for annex funds and the future implications for both GPs and LPs.
Also in this issue, Associate Editor Charles Fellers takes a look at the proliferation of the chief marketing officer position at VC firms and the various roles some marketing partners play.
Amid a crowded market, some VC firms are making a concerted effort to differentiate their firm from the masses, while others are comfortable letting their reputations and experience speak for them.