(PrivateEquityCentral.net) US venture capital firm Accel Partners has reduced the size of its most recent fund for the second time.
Accel plans to reduce the size of its $1.4bn Accel VIII fund, which closed in 2000, by an additional 29 per cent to $680m. Accel also has reduced a strategic $275m side fund, Accel Internet Fund 4, by the same proportions.
Last May, Accel reduced the size of Accel VIII by 32 per cent to $952m after investors balked at the firm’s decision to cut the fund in half but keep the remaining $700m for a future fund.
At that time, Accel decided to refund investors' capital, including backdated management fees, after investors weren't happy with the firm's original plan of splitting Accel VIII into two $700m funds. Some LPs complained the original plan would have tied up their capital for years.
“Projecting the investment pace, we felt a second cut was merited,” Accel co-managing partner Peter Wagner said, according to the Wall Street Journal. “We came to the conclusion that Accel VIII was just too big.” Since its first fund reduction, Accel has invested in only six deals.
Limited partners in Accel VIII include CalTech, General Motors, Harvard University, Hewlett-Packard, Illinois State Teachers' Retirement System, MIT, Northwestern University, the Washington State Investment Board, and the University of Michigan, which recently revealed that the fund's internal rate of return through the second quarter of 2002 was negative 22 per cent, off just slightly from the Venture Economics vintage year benchmark for venture funds of negative 19.8 per cent.
Last week, Alan Austin, who had served as general partner and chief operating officer at Accel for nearly three years, jumped ship to technology sector buyout specialist Silver Lake Partners, where he took office as a managing director and chief operating officer.
Since the beginning of last year, at least 27 venture capital firms – including Walden International, Meritech, Austin Ventures, Walden, Worldview, Charles River Ventures, Kleiner Perkins Caufield & Byers, and Sevin Rosen Funds – have downsized their funds, shedding approximately $5bn in limited partner commitments. Four firms – Mohr, Davidow Ventures, Atlas Venture, Redpoint Ventures, and now Accel Partners – have sliced capital from their funds twice.
In addition, a number of venture capital firms – including Meritech Capital Partners, OVP Venture Partners, Battery Ventures, TA Associates, and Spectrum Equity Investors – have voluntarily waived management fees on funds they control in order to offset potential clawbacks.