to deliver on its promise, as partners keep collecting what the foundation regards as excessive management fees.
OVP’s fourth venture fund, raised in 1997, had the good fortune of maturing during the dotcom bubble years, and it delivered a healthy 63.9 percent internal rate of return, according to data disclosed online by one of its limited partners, the Oregon Public Employees Retirement Fund. But OVP’s more recent funds that were raised in 2000, 2001 and 2007 have all lost money. Those funds have returned -16.7 percent, -18.6 percent, and -11.9 percent, respectively, according to the most recent data posted online by the Oregon Public Employees Retirement Fund.
Venture funds, because they are put into companies in their embryonic stages, are supposed to take 10 to 12 years to mature and generate returns. And because the 2007 vintage fund is still young, Langeler says he’s hopeful it could end up becoming OVP’s best ever. “Chad and I want to go out with our last fund being a very strong fund,” Langeler says.
Those who follow the venture business closely surely won’t be surprised to see OVP close down. It had high hopes for a home run with one of its portfolio companies—Mountain View, CA-based Complete Genomics (NASDAQ: [[ticker:GNOM]])—that ended up being a major disappointment. That company went public in November 2010, and reached a high of $18.55 a share in June 2011, but securities regulations barred OVP from cashing out at the peak.
A few months after the peak, as OVP and other venture firms were free to begin selling stock, Complete Genomics saw its shares crash amid worries about a lack of demand for its genome sequencing service. OVP ended up liquidating much of its stake at low prices of $2.80 and $3.28 a share, as I first reported here in March. More recently, Complete Genomics ended up being acquired by BGI-Shenzhen for $117.6 million, after burning through more than $250 million of investment capital.
With OVP fading from view, the Northwest’s already thin ranks of active venture firms just got thinner. Seattle-based Madrona Venture Group, which specializes in tech investing, raised a new $300 million fund in June. Arch Venture Partners, a diversified fund with a Seattle office that invests more in life sciences and cleantech, raised its last $400 million fund in 2007. Seattle-based Frazier Healthcare Ventures, which leans more toward growth equity investing than traditional startups, is seeking to raise another $400 million fund. Seattle’s Voyager Capital, a tech specialist, is seeking to raise a new $125 million fund. And Bellevue, WA-based Ignition Partners, a tech investor, is reportedly looking to raise another $250 million fund.
Langeler concedes that the disappearance of OVP could make it harder for startups to raise capital in the Northwest, but he adds that he’s confident someone else will step up to fill the void. The combination of big ideas, and entrepreneurs with the skill to build great businesses, has consistently improved over the years in the Northwest, he says.
“Obviously we could leave a gap,” Langeler says. “But on the other hand, I believe that nature abhors vacuums. If there’s good opportunity there, other firms will spring up.”
