Major VC firm OpenView Venture Partners has abruptly laid off most of its staff and stopped making new investments. The departure of two top leaders under murky circumstances appear to have led to the firm’s sudden downfall.
The Collapse of OpenView
OpenView’s leaders departed suddenly after a recent fundraise, leaving the firm rudderless. From a new report in Forbes:
This week, OpenView Venture Partners shocked its employees and the venture capital industry by suspending new investments and laying off half its staff, including all its vice presidents and associates. With the future of the Boston-based firm uncertain, Forbes has learned that the fund made the decision because two of its three leaders — Mackey Craven and Ricky Pelletier — departed, just months after it raised a new fund, sources told Forbes.
Both seem to have left for personal reasons.
What Is Going On Inside OpenView?
OpenView’s fall comes at the most unlikely of times. The firm just closed a new $570 million fund.
If two of the firm’s top leaders weren’t sure they wanted to stay, why on earth did they raise over half a billion dollars from investors?
Even if the remaining staff try to keep OpenView going, winning back the trust of LP’s will be difficult, if not impossible.
Digging Into OpenView’s Returns
The Information, which first reported OpenView’s problems, has suggested that poor performance could be behind its demise:
The sudden fall of the firm, which employed at least 74 people and had raised a total of $2.4 billion, could be a sign of rising pressure on VC firms to generate returns in an era of higher interest rates. Its 2020 fund has lost money on paper, according to documents seen by The Information.
OpenView’s Fund VI, closed in 2020, is showing losses. It’s down about 12% so far, according to the Venture Capital Journal.
However, taking modest losses in the early years is normal. Years 3-5 can be particularly bloody — right where OpenView’s fund sits.
Companies that never find product-market fit tend to shut down within 2-5 years. Meanwhile, the big winners take 8-10 years to mature.
Even the very best investors, like Sequoia, tend to see their portfolios go negative early on. OpenView’s astute LP’s, like MIT, know this.
Wrap-Up
I don’t think performance is the reason for OpenView’s issues. I find it more likely that the departed leaders had personal problems we’re not privy to.
In any case, OpenView’s fall will be one of many in the coming years. Most venture funds have poor performance, and the 2021 vintage is likely to be especially horrible.
What do you think happened at OpenView? Leave a comment and let us know?
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