VC firm Ignition Partners has brought on Rachel Chalmers, a long-time IT analyst from The 451 Group, to boost its Silicon Valley presence.
7/19/2013 – GigaOM
Ignition, based in Bellevue, Wash. has a lot of Microsoft DNA in general partners John Connors, a former Microsoft CFO, and Frank Artale, a former Windows GM. Earlier this year, it brought on Nick Sturriale, a VC veteran from JAFCO Ventures, and Sevin Rosen to launch its Palo Alto office, where he and Chalmers will hold down the fort.
Chalmers, who spent 13 years at The 451 Group, had already worked with many of the Ignition folks. “We got in the habit of working with Nick who’d pull me in for strategy and consulting work on their investments,” Chalmers said in an interview. With this hire, they’re formalizing that collaboration.
Go to full article here.
5/15/13 – Business Insider
John Connors joined Ignition as a partner in 2005 after a 16-year, storied career at Microsoft where he rose to become the chief information officer and then CFO. His more recent big hits include Splunk (IPO 2012), Heroku (acquired by Salesforce.com), XenSource (bought by Citrix). He’s currently backing FiREapps, Scout Analytics, Datasphere, Opscode and Parse. He’s also on the board of Nike. When not working, you can find him working cattle on his ranch in Montana, where he grew up.
Go to full article here.
John Connors, a specialist in enterprise software and services, was an investor in big data company Splunk, one of the hot IPOs of 2012. Splunk soared 109% on its first day of trading and was recently trading at a market cap of about $4 billion. He also invested in Heroku, which Salesforce.com acquired in 2010 for $212 million, and XenSource, which was acquired by Citrix in 2007. Other current investments include Parse, Motif Investing, Datasphere and Opscode. Connors was previously at Microsoft for 16 years, holding a number of executive positions including chief financial officer from 2000 to 2005. Connors’ firm Ignition Partners recently reformed as a smaller team with three general partners. He’s on the boards of Nike, FiREapps, Scout Analytics, Datasphere, Motif, Splunk, Opscode, Parse and Tier 3. Connors relaxes by working cattle on his ranch near his hometown in Southeastern Montana.
Go to full article here.
For the third year in a row, TrueBridge Capital has partnered with Forbes to cultivate the most exciting billing in venture capital, The 2013 Midas List, which rumor has it will be published shortly. We have been gathering and analyzing data throughout the year, employing the same tested and data-driven process with which TrueBridge underwrites its investments, and using our broad networks to assess the state of the venture capital industry as a whole.
As in 2011 and 2012, we have also selected the best of the best from the next generation of venture capitalists, based on quantitative data and qualitative references confirming the sentiment throughout the industry. The 2013 Midas List: Hot Prospects consists of investors who are keeping the industry on its toes and are poised to break into future Midas editions. The venture capitalists featured below all have signature investments, and entrepreneurs are highly attuned to these investors’ criteria. A combination of brilliant company recognition and plain hard work has helped these investors achieve success. Without a doubt, they are worthy of top billing; one investor from last year’s draft is included on this year’s Midas List (stay tuned!), and we expect that some of the VCs listed below will bump up a weight class or two in the future.
Frank Artale, Ignition Partners
Although relatively new to professional venture investing, Artale has been around the software industry for years. His experience as the founder of Consera Software and time spent building giants like Microsoft , XenSource, and Citrix have given him deep insight into the rapidly growing cloud and virtualization spaces. Before joining Ignition Partners, he was a member of Accel’s venture development team and advised companies such as Cloudera, Couchbase, and Xensource before ultimately joining the executive team at Xensource. He has quickly burst onto the enterprise investing scene, making investments in Bromium, a next-generation virtualization company, ServiceMesh, the fast-growing definer of hybrid IT, and the aforementioned Cloudera, which is now a $700 million company. Watch out for Artale and his reputation as an operator; entrepreneurs love working with him. He is the kind of guy who returns calls within the hour and has a widespread network from the Bay Area to Seattle to New York. We will certainly be tracking the moves that he makes.
Go to full article here.
Today Ignition Partners announced the closing of Ignition Venture Partners V (“Fund V”), a $150 million fund whose primary focus is early-stage investments in business software and cloud computing companies. All of the Ignition partners in existing funds look forward to continuing to work together on the more than sixty existing investments in Ignition venture funds. Almost half of these active companies continue to have a significant presence in the Seattle area and support more than 2,400 local jobs.
It has been an exciting year for Ignition with our venture funds successfully exiting ten companies in the past twelve months and delivering more than $450 million in liquidity to our investors including: Splunk’s IPO (NASDAQ: SPLK), Zenprise’s acquisition by Citrix, and StorSimple’s acquisition by Microsoft. Over the life of Ignition’s venture funds more than 25 companies have been sold or gone public including Splunk, Heroku, and Zenprise, and there continues to be strong growth across the portfolio into 2013.
“The entire Ignition team looks forward to working with all sixty plus existing companies across its portfolio and partnering with new companies coming into the fold through Ignition V,” said Steve Hooper, a founding partner at Ignition. “Ignition operates as a team and as such welcomes and looks forward to working with Nick Sturiale as the newest Partner at Ignition.” “Every member of the Ignition team is committed to continuing to work with all of the companies across the Ignition funds to realize the best possible outcome for each of them,” said Jonathan Roberts, a founding partner at Ignition.
Effective with the closing of Fund V, Ignition Ventures now operates out of an office in Bellevue, WA and Palo Alto, CA with the addresses below:
350 106th Ave NE
Bellevue WA 98004
421 Kipling Street
Palo Alto, CA 94301
Ignition helps entrepreneurs build innovative, category-defining businesses of lasting value. The firm has offices in Bellevue, Wash. and Palo Alto, Calif.
Venture-capital firms are taking stiff measures to survive a tough fundraising environment and lackluster returns, including gutting their partnerships, slashing their fund sizes and refocusing their investment areas.
Take Ignition Partners, for example, formed amid the tech boom in 2000 by several former Microsoft Corp. and McCaw Cellular Communications Inc. executives. While the Seattle venture-capital firm raised around $1.2 billion over the past 12 years, it didn’t produce a consistent string of startup hits. So when it asked investors last year for money for another venture fund, the firm got the cold shoulder.
That prompted Ignition to reboot recently. The firm is shedding seven of its nine investing partners for its next fund. It is cutting the size of the new fund to about $150 million, down from the $400 million fund it last raised in 2007. Ignition also is bringing on a Silicon Valley venture capitalist and will stop investing in consumer technology and telecom, instead focusing solely on business-technology startups.
There were some difficult conversations within Ignition, but “the market challenge was clear,” said John Connors, a former Microsoft chief financial officer who is part of the smaller group at Ignition raising the new fund.
“The marketplace was telling us that smaller [venture] funds are where investors want to be” for potentially stronger returns, added Steve Hooper, a founding Ignition partner who isn’t continuing with the new fund. “Everyone accepted the fact that we needed a much smaller fund.”
Ignition’s revamp is one of many transformations taking place amid a winnowing of the venture-capital industry, which invests in young companies with the aim of profiting later when the startups get sold or go public. Despite a wave of venture-backed initial public offerings such as LinkedIn Corp. and Facebook Inc. over the past two years, the hit investments largely benefited brand-name venture firms such as Greylock Partners and Accel Partners.
For many other venture firms, returns have continued to be relatively weak. For the 10 years ended last September, U.S. venture funds produced a 6.1% return, compared with the Nasdaq Composite Index’s 10.3% increase and the Dow Jones Industrial Average’s 8.6% rise over the same period, according to Cambridge Associates LLC.
As a result, while top venture firms such as New Enterprise Associates have easily raised money, investors are shunning many others. U.S. venture-capital funds garnered $20.3 billion in 2012, essentially flat from 2011 and down from $39 billion in 2007, according to Dow Jones LP Source.
Overall, there were 842 venture-capital firms in the U.S. in 2011 that raised money in the previous eight years, down 16% from 1,004 in 2007, according to the National Venture Capital Association.
Such dynamics are pushing venture firms to reassess and remake themselves. In late 2011, Scale Venture Partners pulled out of investing in health-care companies, citing a tough regulatory environment for the sector, to concentrate on tech investments. Meanwhile, Venrock and Menlo Ventures have reduced the sizes of their funds in recent years and either changed or trimmed back the partners involved.
More venture firms “realize that in order to be successful and deliver returns, they need to be focused on smaller groups of people and smaller sets of companies,” said David Hornik, a venture capitalist at August Capital, which in October closed a $300 million fund, compared with $350 million for its previous fund. Six partners are investing out of the new fund, down from seven for the prior fund, he added.
Many venture firms are responding to a higher bar from investors, who have been disenchanted with scant venture returns and are scrutinizing partnerships closely to pick out the stronger versus weaker venture capitalists in a firm.
Investors “have become more selective because their return requirements are higher.” said Tom Gladden, a partner at investment management firm Adams Street Partners, which invests in venture funds. “We’re going to evaluate the [venture firm's] team to the point of looking at the personal franchises of individual partners.”
Ignition was launched by Microsoft veterans such as Brad Silverberg and Cameron Myhrvold, and McCaw executives such as Mr. Hooper. The firm snagged marquee tech names, including Microsoft CFO Mr. Connors in 2005, to join its partnership.
But few of Ignition’s investments resulted in Facebook-like returns. Some of Ignition’s longtime startups, such as Seven Networks Inc. and Telecom Transport Management Inc., have yet to generate any profit, said a person familiar with the venture firm.
Ignition found some success was in business-tech investments, including XenSource, which specialized in a technology area known as virtualization and which sold for $500 million in 2007 to Citrix Systems Inc. Last April, Ignition-backed Splunk Inc., which indexes and makes data searchable, went public. According to a person familiar with the firm, Ignition has returned $400 million to its investors since June, largely because of Splunk’s IPO.
Ignition’s Mr. Connors and another partner, Frank Artale, were involved in the Splunk and XenSource deals, through which they met Silicon Valley venture capitalist Nick Sturiale, who also invested in the two companies. Mr. Sturiale invested $8 million in Splunk while at another venture firm, which yielded that firm a more than $500 million return.
Still, Ignition found little traction with investors when it tried raising a new fund in mid-2012. So Messrs. Connors and Artale decided to move forward with a smaller vehicle and bring on Mr. Sturiale.
Ignition’s other partners aren’t leaving the firm immediately, as they manage their existing investments.
Fundraising for Ignition’s new $150 million fund now appears to be going well, said people familiar with the new fund, with investors focused on the track records that Messrs. Connors, Artale and Sturiale had with Splunk and XenSource.
Given the tough venture environment, that Ignition may pull off a smaller fund “is a success story,” said Mel Williams, a partner at TrueBridge Capital Partners, which invests in venture funds.
Splunk IPO ends a 6 year-old venture capital debate.
“The traditional venture model seems to us to be broken.”
That was Steve Dow, a partner with venerable VC firm Sevin Rosen, explaining in 2006 why the firm had taken the unprecedented step of returning more than $200 million in commitments to a fund that it had been raising. The comments sparked intense discussion throughout the start-up ecosystem, with many agreeing that too much money was chasing too few deals.
But there were dissenters, including yours truly. My belief was that later-stage valuations had indeed become frothy, but that there was still value to be found in early-stage investments. And it was only bolstered when I appeared on CNBC to discuss the issue two days later, only to be interrupted by the news that Google (GOOG) had agreed to acquire YouTube for $1 billion (Dow came on later that afternoon, but the ironic juxtaposition was ignored).
But the biggest blow to Sevin Rosen’s argument came this week, when data analysis software maker Splunk (SPLK) raised nearly $230 million in its IPO. Not only did Splunk price well above its range, but its shares more than double on its first day of trading. By market close, the company was worth approximately $3.28 billion.
And the biggest outside investor in Splunk? Sevin Rosen.
The firm first invested in 2004, and then participated in a pair of follow-on rounds. By the time Splunk filed to go public, it held a 20.4% stake with more than 16.43 million shares. The position today is worth more than $583 million, which means it nearly returns the entire $600 million Fund VIII that Sevin Rosen raised in 2000 (which featured a -11.7% IRR through Q3 2011, according to CalPERS).
Sevin Rosen still hasn’t sold any shares, so the actual distribution may look different, but this deal was already in its portfolio when Dow uttered his infamous words. As one VC said to me today, it now sounds a bit like when U.S. Patent Office chief Charles H. Duell said in 1899: “Everything that can be invented has been invented.”
In the aftermath of Dow’s comments, Sevin Rosen began to break up. Nick Sturiale, the partner responsible for Splunk and Xensource (sold to Citrix for $500 million), left to join another venture capital firm. Then Sevin Rosen’s remaining West Coast partners, including Steve Dow, broke off to do their own thing (although it’s never been quite clear what that thing was). The remaining team in Dallas managed out the existing portfolio, and began trying to raise a new fund within the past year. My guess is that it will market hard on Splunk’s success, but its past comments and Sturiale’s absence could make such efforts a very tough sell.