We’ve mentioned the demise of the well-known Silicon Valley venture firm Mobius Venture Capital before.
The WSJ’s Rebecca Buckman follows up on the story (sub req), and explains how things turned sour after the Internet bubble burst, and how leaders such as Gary Rieschel and Charles Lax, moved on. Lax left in 1999 to form Grand Banks Capital, and Rieschel left a couple of years ago to launch a fund in China.
The firm invested in companies like Verisign, Danger and Infinera, but also bet on dot-com bust, Webvan, and Terabeam. The kicker quote comes from Lax, who says “the writing was on the wall” when Rieschel left to China.
Mobius partners are “devoted, focused people” who are now trying hard to return money to their investors, he adds. “But…they raised too large a fund, they committed the capital as if there was no tomorrow, and they dug holes like Terabeam that were insurmountable.”
Lax’s Grand Banks, we note, has a much smaller fund size. Word is, Brad Feld, the Mobius partner in Colorado, who now has perhaps the highest profile of the remaining partners via his a well-read blog, is at the center of an effort to launch a separate fund. He didn’t mention this when he confirmed a few months ago that Mobius had decided not to raise another fund.
We’ve often wondered aloud in these pages about what happens to firms that underperform, and are always surprised when investors step up to give them more money to keep going. Apparently, the capitalist system is still at work. Of late, several firms have been forced to give up fund-raising, at least in their current form, including Silicon Valley’s WorldView.
Tags: co:Mobius-Venture-Capital, People:Brad-Feld, People:Charles-Lax, People:Gary-Rieschel7 Comments
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mohole said:
I think it was Steve Jobs who said more companies have died of indigestion than starvation.. Being a VC firm, the easy money must have created a positive feedback loop..Since Brad Feld and everyone else are pretty darn smart people without the curse of the money they will do just fine..
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Lee Courtney said:
No, that bit of wisdom is from David Packard. “…more businesses die from indigestion than starvation†- The HP Way
How Bill Hewlett and I Built Our Company
by David Packard
Harvard Business School Press, 1995 -
dumbfounder said:
What happens to their stakes in companies that are still around if they go under? Do they sell them off to another VC firm or to the highest bidder? Will some of their limited partners step up to the plate to help out?
Lee, I think the new HP way is to spy on your own boardmembers: http://www.forbes.com/2006/09/07/hewlett-packard-dunn-cx_po_0907autofacescan01.html
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Mobius LP said:
Brad, Heidi Roizen and Rex Golding are solid performers. Mobius biggest error was allowing Gary Reischel to stay around and ‘invest’ as long as he did.
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Atlas Ventures Observer said:
Same thing is going on with London and Boston-based Atlas Ventures. Check it the turnover there and the underperformance. There are still too many venture firms whose core competency is raising money from LPs eager to get into the asset class regardless of the GP manager risk. It’s amazing how long it takes for the market to cycle these firms out.
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Brian Berliner said:
Longish post on this topic here:
Mobius Venture Capital Getting Hammered in the News
http://www.brianberliner.com/2006/09/08/mobius-venture-capital-getting-hammered-in-the-news/I have no idea why the firm is not raising another round.
My article perhaps wrongly assumed that it was because they were under-performing.
Perhaps it was because the GPs didn’t like working with each other?
Perhaps it was because Gary left?
Perhaps it was all of the above?
No matter. We will never know.
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mark pincus said:
i find it very hypocritical for charlie lax to criticize the mobius partners for ‘committing capital as if there were no tomorrow’ when he did exactly that running softbank capital partners which showered money on every pre-ipo company prior to the bubble bursting. while he has moved on, i’m still a hostage in that fund which i believe is now worth around 15 cents on the dollar.
i have worked with mobius which successfully backed my company, support.com, and can say that i know few vc’s smarter than brad feld. i would invest again in any fund he launched.
4 Trackbacks
2:20 am
Mobius Venture Capital Getting Hammered in the News at Brian Berliner’s Brain said:
[...] Matt Marshall at VentureBeat: VC Mobius doled out capital “as if there was no tomorrow.†[...]
11:42 am
Bridging the Equity Gap Faced By Early-Stage Companies at Disruptive Thoughts said:
[...] (Aside: in Feb. I talked about the non-traditional practices of Union Square Ventures and Brad Feld from Mobius. Since then I’ve gotten to know Fred and Brad and I’m even more impressed with what they’re building at USV. Maybe we’ll also see Brad pursue an innovative strategy in the coming months) [...]
7:23 am
VentureBeat Wire » Mobius faction aims to raise $175 million to $200 million fund said:
[...] We’ve mentioned the decision by Silicon Valley firm Mobius Venture Capital to throw in the towel, and to not raise another fund, due to poor performance. [...]
10:49 pm
VentureBeat » Roundup: Jobster CEO out, Al Gore dominates Bali, Lennon invests, Scoble out, more said:
[...] capitalists Heidi Roizen slims down — Roizen has closed down her venture capital firm, as already reported, and instead has slimmed down, and crafted a collection of songs to help other women lose weight [...]