sevin rosen logo.jpgLast Saturday, we wrote a piece about the decision by Sevin Rosen Funds, a big-name venture capital firm, to bag plans to raise another fund. The firm cited “terrible” investment conditions.

The rarity of the move suggested significance — a sign that there is trouble in the VC industry, with too much money floating around. The firm’s partner Steve Dow told us: “Giving back money is an unnatural act.”

We now get the back story from trade reporter Dan Primack. He’s suggesting the firm did a snow job on the New York Times, which first reported the story — making it seem that the only reason for the decision was a frank assessment of the environment. In fact, Primack says, the firm also had some internal troubles, and wanted to get ahead of them by spinning its decision not to raise money as a positive thing:

[NYT reporter Gary] Rivlin directed the firm to a Silicon Valley-based reporter named Miguel Helft, who spoke with SRF partner Steve Dow, and who also was given an explanatory letter that had been emailed to prospective LPs. Last Saturday, Helft penned an article that portrayed SRF as being one of the few firms with the courage to pull its money from where its mouth was. Similar press coverage soon appeared elsewhere, as Dow was extraordinarily accessible (as was the letter). He spoke with the Wall Street Journal, CNBC and myself, among others.

I don’t know who organized this press strategy • Dow? SRF marketing director Jennifer Michalski? • but it was extraordinarily effective.

…But the bigger problem for Sevin Rosen was that it was no longer in that crème de la crème category. Its first five or six funds • dating back to 1981 • had been absolute knockouts, but its more recent efforts had flagged.

..There also was some occasional strategy drift, as best evidenced by last fall’s decision to lead a $26 million Series D round for Firefly Mobile, which provides cell phones for pre-teens and their parents. Not only was FireFly’s consumer-facing strategy a bit outside of Sevin Rosen’s traditional competency, but it also was a late-stage deal at a pre-money valuation of around $100 million…Nine months later, however, Sevin Rosen wrote off the entire investment, after deciding to not participate in a company recapitalization. There have been a series of other severe write-downs or write-offs in recent months.

Of course, we too at VentureBeat took Dow’s word on his firm’s reasoning for the decision — even if we did point out the firm’s mediocre results lately, some partner departures and its Alien setback. After our story on Saturday, we heard back on Sunday from people saying, off the record, that the firm did indeed have some internal differences (and we updated the story to that effect), even though Dow told us there weren’t. Truth is, we’re still not entirely clear about the facts on this story. Dan has a good hard-hitting piece, but he doesn’t go as far to say that Sevin Rosen really had trouble raising the fund. We’ve reached out to the NYT’s Helft, in case he has any comment on this, and will update as necessary.

What do you guys think? What’s Sevin Rosen’s reputation like?