OpenView, which is headquartered on the waterfront in Boston, Massachusetts, abruptly laid off half its staff this week. 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, 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 .
Most of its investing partners are staying on — including the firm’s third leader Blake Bartlett, founder Scott Maxwell and about 10 lower-level partners — and the firm may resume new investments in the future, a source said. So far, the firm has only drawn about $80 million out of its new $570 million fund, the seventh in its history, which it closed in March, a source said. Its remaining employees are planning to spend the next few months providing support to portfolio companies, as well as formulating a new plan to present to limited partners about the future of the firm.
Pelletier and Maxwell declined to comment; while Craven and Bartlett could not be reached. OpenView did not immediately respond to a comment request. The sudden and unexpected decision this week came after a chaotic several months that had left the firm with a leadership void.
Shortly after OpenView announced its new fund earlier this year, Pelletier stepped down from his role and decided to leave the venture capital industry entirely (he is now investing in small businesses around New England, including car washes). In November, Craven told the remaining leaders that he wanted to step down, shocking his colleagues, two people said. It’s unclear what spurred the decision, but two sources say it appears to be driven by personal circumstances.
Leaders told stunned employees at an all-hands meeting Tuesday that Craven wasn’t leaving to invest elsewhere. Bartlett had been on sabbatical, but was pulled back last month in an emergency attempt to rescue the firm, the sources said. Ultimately, Craven could not be persuaded to stay on and Bartlett found it untenable to move forward as the sole leader.
OpenView was founded in 2006 by Maxwell, a former investor at Insight Partners. The firm has some $2. 4 billion in assets under management.
Maxwell is still part of the firm’s leadership circle, but has taken a step back in the last several years after coordinating a transition to the management triumvirate of Bartlett, Craven and Pelletier. Its partners and backers have cashed out in recent years, most notably through Craven’s investment in New York-based cloud software company Datadog, which in 2019. That may have made retiring from VC more enticing, particularly for OpenView’s team which is not located inside Silicon Valley’s insular tech bubble.
The Information news of the wind down on Tuesday. Since then, speculation has run rampant in the industry about the impact of market headwinds and LP pressure on OpenView. Two sources deny this, noting that the leaders made the call without consulting LPs and that the firm still has significant capital to deploy, having made fewer than 10 investments out of its latest fund.
Venture capital firms often have a “key man clause” in their contract with limited partners stipulating that it must halt investments if certain crucial people are no longer present. A source told that Craven’s decision did not technically trigger the clause, but that leadership decided it needed to pause investments and reevaluate the firm’s future. They aim to provide laid off employees with at least six months of severance pay, and give the remaining team members ample time to decide their next steps.
If OpenView does not resume investments, it has several paths forward. In one scenario, it would draw a portion of its remaining $500 million in LP commitments to provide support to existing portfolio companies, one source said. It may alternatively decide to offload its positions into these startups to other investment firms and return all the capital to LPs.
A third option, which the source described as less likely, includes proposing to LPs a revamped leadership team which would resume new investments. That would be an uphill battle, as the less experienced investors would be contending with a challenging venture capital market that has given preference to AI startups over the more traditional enterprise software firms that comprise OpenView’s bread and butter. “It depends on if the guys want to do it,” a source said.
“They’re very capable people, but the challenge is, are they all in?”.
From: forbes
URL: https://www.forbes.com/sites/kenrickcai/2023/12/06/openview-collapse-two-senior-leaders-mackey-craven-ricky-pelletier-quit/
