Atlas Slashes Fund Size, Cuts Staff
Monday December 16, 6:28 pm ET
By Dane Hamilton
NEW YORK (Reuters) - Atlas Venture, a prominent venture capital firm, said it will slash the size of its latest fund by 38 percent, close some offices and reduce its staff, reflecting a harsh climate for venture capital investing.
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Atlas, based in Boston and London, said it will cut the size of its latest fund, Atlas Venture VI, to $600 million from its original size of $967 million. The firm has already raised $2.1 billion for venture investing over the years.
Atlas will close its Seattle and Menlo Park, California, offices in early 2003 and will reduce the size of its Paris, Munich and London offices. Three European senior principals will leave the firm in 2003, it said.
With venture capital suffering its worse period since its inception in the 1970s, Atlas' moves aren't surprising, experts say. While venture capitalists raised billions of dollars during the technology heyday of the mid- to late 1990s, many now find they can't spend the money profitably.
"The whole industry is suffering from overcapacity and the market has slowed down by 50 to 80 percent in deals completed, initial public offerings and funds invested," said Thomas Holland, a Bain & Co. consultant who specializes in private equity. "You will see many of these guys cut back."
Like all venture funds, Atlas raises money in the form of "commitments" from investors like pension funds and insurance companies, which are drawn down when the firm makes an investment. It said those commitments that haven't been drawn down will be cut by 38 percent, meaning investors won't have to put up as much money.
"We are releasing investors from a portion of their investments," Chris Spray, Atlas senior principal, said in an interview.
He said the markets "will no longer absorb" the amount of money raised during the venture boom years, because large companies that buy technology from smaller, venture-backed companies have dramatically slashed capital expenditures in the last three years, driving down their valuations.
Atlas, known for investments in biotech companies like deCode Genetics (NasdaqNM:DCGN - News) and Exelixis (NasdaqNM:EXEL - News) and technology companies like SpeechWorks (NasdaqNM:SPWX - News), said it will continue to support its existing investments in Atlas Venture VI, which was launched in August 2001. The fund has already made investments in 16 companies that are "performing well and in line with expectations," it said.
However, Atlas said large venture funds such as those with more than $1 billion in assets "are out of step with a venture capital marketplace."
Atlas Venture said it will now focus on two markets where it has a strong presence: the technology-rich Boston area and Europe. The firm has raised six funds with a total of $2.1 billion. |
