Atlas Venture, the international communications, information technology and life sciences investor, has taken further defensive action in response to the sustained downturn in the global venture capital market.
The Boston-headquartered firm is to cut its Atlas Venture VI fund, which closed on $967m in April 2001, back to $600m in order to “better align with current market conditions”, the firm said in a statement. It is the second cutback Atlas has announced in the last six months, following an initial decision to reduce the fund by an eighth in June.
Atlas has also confirmed the closure of offices in Seattle and Menlo Park, as well as a reduction in headcount at its European offices in London, Munich and Paris, where three senior principals are to leave the firm.
Christopher Spray, London-based senior principal at Atlas Venture, said that prospects for future venture capital investment remained positive, provided the current “overhang” of uninvested capital would be removed from the market. 'In the past several years, Atlas Venture and many other VC firms have structured themselves to manage funds in the $1bn range, but we now believe that these large fund sizes are out of step with a venture capital marketplace characterized by a more measured investment pace, a reduced capital requirement per investment, and lower overall exit valuation expectations than we saw in 1999, 2000 and early 2001 when most of these funds were raised.'
Atlas Venture VI has made investments in 16 companies since launch, representing approximately a third of the total number of investments targeted for the fund.
Announcing a first round of cuts in June, the firm said its strategy would be focused on nurturing portfolio companies, enabling it to reduce capital requirements for follow-on investment. At the time, the firm said it would still aim to make five investments per quarter.
Atlas’ decision to release limited partners of parts of their commitments and reduce costs is the latest in a series of similar steps taken by venture capital firms to streamline their operations, having raised billion dollar funds at the height of the boom prior to the collapse of the high tech sector.
In the US, Accel Partners, Redpoint, Kleiner Perkins, Mohr Davidow, Walden International and Austin Ventures have all made similar-sized cutbacks. In Europe French-based firm Galileo recently cut its third fund by E92m to E158m due to a reduction in deal activity. Viventures and Benchmark Capital have also reduced the size of their respective European funds.
Atlas has been one of the more active early-stage investors in Europe. Recent deals include a £6m investment in Phyworks, a Bristol-based fabless semi-conductor company. The firm has also made two recent appointments, hiring Anil Khatod and Timothy Wilson as principals for its telecoms and life science departments.
The firm has managed six international venture capital funds since 1980, and currently manages more than $2.4bn in committed capital.