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Mayfield takes some hits

(Updated below with reference to Agilent report, and more.)

mayfield.jpgMayfield is another venture capital firm with a big name and history in Silicon Valley. It boasts three decades of experience and 450-plus investments, with more than 100 of those going public, and counts 3com, SGI, Compaq and Genentech among its hits.

So this item by Dan Primack is an eye opener. It says Mayfield has had some serious issues with its recent investing and fund-raising. Here's just a snippet, but the whole thing is worth reading:

Mayfield, one of the earliest and most prestigious venture capital firms, has lost its luster among the creme de la creme of limited partners. The Sand Hill Road firm is about to close its twelfth fund, but without at least seven top-tier limited partners who had invested in prior Mayfield funds. What follows has been independently confirmed with five different sources, who agreed to speak only under the condition that neither they nor their institutions be identified. What I can share, however, is that the seven dissenting LPs are brand names - in some cases household names - from the university endowment, private foundation and fund-of-funds arenas.

General readers without much exposure to the venture capital business might find this report hard-going. It is complex stuff. You'll also note Primack's elaborate off-the-record arrangement with sources about attribution. He's apparently got five difference sources saying that some big-time investors have decided not to invest in Mayfield, but he still doesn't name the investors. Perhaps that will come Monday? Perhaps not. Trouble with this secretive venture capital world is that it's tough to get people on the record, making most reporting about sensitive VC issues extremely difficult. As Bob Woodward has said, using anonymous sources can be crucial in certain reporting, and we agree. It helps, too, to trust the reporter, and in Primack's case, he is solid. So we've decided to link to this. We will also try to get Mayfield's response [they're responded; see update below]...(more)...

We had our own tough time with sourcing on this story yesterday about another venture firm, Lightspeed Venture Partners, which is apparently breaking up.

Update: Speaking of anonymous sourcing, check out this report from BusinessWeek, which relies on a single anonymous source to report the following:

Private equity firms Kohlberg Kravis Roberts and Silver Lake Partners have won an auction to purchase the semiconductor-products business of Agilent Technologies (A) for $2.65 billion, according to a source close to the matter. Agilent may announce the sale as soon as Monday, when it reports fiscal third-quarter earnings.

Update 2: Some noteworthy comments below, including more from Dan Primack about the sourcing issue. We've pulled up Dan's comments, as they're important:

Ahh... sourcing. The bane of my professional existence.

In this particular case, we had to make a decision: Is it better to run the story with anonymous sources, or not run it at all (since no one would would have talked otherwise)? The third option was to only print the names of LPs who didn't speak to me (but who I know dropped out), but that would just be identification by elimination. So what you have is what there is. Monday's print story has more details, but not the LPs' names.

For redundancy: I received confirmation on the gist of the story from six different people (some departing LPs, some not) during independent interviews, and every specific fact was at least double-sourced, usually triple or quadruple. Mayfield declined to respond to at least six inquiries over the past two weeks (including direct emails, voice mails and a request via its outside PR firm).

Update: Mayfield got back to us, with a "no comment."


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Ahh... sourcing. The bane of my professional existence.

In this particular case, we had to make a decision: Is it better to run the story with anonymous sources, or not run it at all (since no one would would have talked otherwise)? The third option was to only print the names of LPs who didn't speak to me (but who I know dropped out), but that would just be identification by elimination. So what you have is what there is. Monday's print story has more details, but not the LPs' names.

For redundancy: I received confirmation on the gist of the story from six different people (some departing LPs, some not) during independent interviews, and every specific fact was at least double-sourced, usually triple or quadruple. Mayfield declined to respond to at least six inquiries over the past two weeks (including direct emails, voice mails and a request via its outside PR firm).

dan primack on August 12, 2005 8:35 AM
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As titillating as it may be to be a voyeur into the secrets of a VC firm's dealings with its investors, I think you guys are missing the larger story about the VC industry. You've run entries about people change at several VC firms (several about partner transition at KPCB, yesterday's about Lightspeed, the roots of Shasta in Battery, Trinity, et al., Howard Anderson leaving Battery, Drazen leaving Sierra, etc.) [feel free to edit this and add appropropriate SB links].

The interesting story isn't how one firm deals with LPs or how GPs are agreeing to disagree. The real story is the tsunami of change in the VC business that is rolling through -- what's causing it and what are the implications on Silicon Valley and entrepreneurs? There are many facets to this story -- enough for a multi-part series in the Merc. It is about proximate causes (aging of a wealthy generation and movtivation, globalization of product markets and labor markets, abundance of capital and scarcity of inefficiencies to create outsize returns). What we are witnessing (or participating in) is creative destruction (in the Schumpeter sense) - the re-invention of the VC industry. Like all re-invented industries, price umbrellas break, cost structures change, and new winners emerge with new and insightful strategies. Ultimately, everyone is better off (at least in aggregate) but it is sausage in the making.

Peter Rip on August 12, 2005 9:58 AM
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Right on Peter - great idea on the multi-part series - would love to see it.

Some related thoughts at http://reservoirpartners.typepad.com/reservoir_partners_enterp/2005/08/monogamous_vcs.html

on August 15, 2005 9:17 AM
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