Kleiner Perkins, one of the valley's biggest name venture capital firms, is raising a so-called "annex fund," or reserve fund it can tap to support companies it has already backed to help ensure they get through the downturn.
Kleiner has also reopened fundraising for funds it initially finished raising last year: its $700 million thirteenth fund, and a $500 million Green Growth fund. Notably, Kleiner has opened the Green Growth fund to limited partners that have not previously invested with Kleiner Perkins. The story was first reported this morning by PEHub.
VentureBeat has confirmed that Kleiner has reached out to existing and even new investors to see if they would support investments in these funds.
That Kleiner is reaching out to new investors is almost unprecedented because Kleiner has historically never had to reach out to investors. The high demand for access to Kleiner's funds have traditionally made it next to impossible for new investors to partake of the funds. "Even the creme de la creme is being affected by this," one investor in Kleiner Perkins told me, requesting anonymity because of the issue's sensitivity. "This is unheard of."
The annex fund will be used to support companies Kleiner has backed in the funds it raised in 2004 and 2006 (its 11th and 12th funds respectively), a story first reported by PEHub today.
Kleiner's outreach is coming in part because it relied so heavily on investors such as university endowments which, ironically, were once considered the most valuable because they were long term investors and unlikely to be shaken by short-term trends. Since late last year, however, university endowments from Harvard to Yale, Columbia, Duke, Dartmouth, Cornell, University of Virginia and even Stanford have had trouble meeting their commitments because of the capital calls problem we've reported previously. These endowments have traditionally recycled profits from their previous VC investments back into their new commitments to venture firms. However, with little to no profits arising from venture capital in recent years, the endowments have no cash on hand to reinvest in these venture firms. The cash squeeze is so bad that these endowments are even having trouble meeting their existing commitments, let alone new commitments to venture firms. General Motors, another company facing severe financial trouble, is another Kleiner investor.
To be sure, Kleiner will have no trouble raising funds, because it is still considered a top venture firm, and there are plenty of investors wanting to access it. Its existing base of investors is still diverse, including many investors who are not in financial trouble. Finally, it should be noted this situation stems from macroeconomic trends that are no fault of Kleiner's. Its troubles are in quite a different league than those of say HRJ Capital, the investment firm that was caught making commitments to invest in other venture capital firms without even having the money on hand to do so (HRJ Capital was also an investor in Kleiner).
Kleiner has declined several VentureBeat requests for comment over the past couple of weeks on this topic.
Here are some known investors in previous Kleiner funds:
Andrew W. Mellon Foundation Endowment Fund BPE private Equity G.m.b.H. California Institute of Technology Endowment Cisco Systems, Inc. (NasdaqGS:CSCO) Comcast Interactive Capital Comcast Spectacor, LP Commonfund Capital, Inc. Duke Management Company EdVenture Ventures Ford Foundation, Endowment Fund General Motors Asset Management General Motors Investment Management Corporation Georgia Tech Foundation Inc. Georgia Tech Foundation Inc., Endowment Fund Harvard Management Co., Inc. Harvard University Endowment Horsley Bridge Partners Inc. HP Financial Services, Investment Arm HRJ Capital International Business Machines Corp. (NYSE:IBM) INVESCO Private Capital Itochu Technology Inc.'s Venture Investment Division JPMorgan Asset Management (UK) Limited Legacy Venture Liberty Digital, Inc. Los Angeles County Employees' Retirement Association Massachusetts Institute of Technology Endowment Arm MIT Private Equity Netscape Communications Corporation Northgate Capital Group, L.L.C. Pomona Capital Regents of the University of Michigan, Endowment Rochester Institute of Technology Endowment Rockefeller University Endowment Stanford Management Company Sun Microsystems Inc. (NasdaqGS:JAVA) The Hillman Company The Notre Dame Endowment The William and Flora Hewlett Foundation, Endowment Fund University of California Regents' Endowment Fund University of Michigan Endowment Vanderbilt University Office of Investments Yale University Investments Comcast MO Group, Inc. (Prior) Oracle Ventures (Prior) St. Paul Venture Capital, Inc. (Prior) University of California Regents' Endowment Fund (Prior)