Venture firm says no to $1bn

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The Independent Online

An aggressive US technology venture capital firm has turned down $1bn (£670m) from investors saying that it cannot spend the money in the current economic climate.

An aggressive US technology venture capital firm has turned down $1bn (£670m) from investors saying that it cannot spend the money in the current economic climate.

The news is set to send shudders through the already flaky technology investment community that last year witnessed big falls on New York's Nasdaq and London's TechMARK stock markets.

CrossPoint Venture Partners, which describes itself as "the industry's best-performing early-stage venture capital firm", took its bearish stance after realising that it would take years for many of its future investments to be floated in the current bearish market.

A spokeswoman for the group said: "We did a round of funding which was over-subscribed. But we didn't draw down the money. We decided to turn our back on the market. Because the market turned, there are fewer opportunities in the public market for new issues. This has created a log-jam of companies wanting to float. By spending the $1bn we would have added to the log-jam."

CrossPoint, whose investments have included Ariba, Juniper Networks and Digital Island, refused to reveal which companies had committed to its new fund but recent backers included Massachusetts Institute of Technology, Wellcome Trust, Bell Atlantic and Rockefeller Foundation.

The souring of the technology market seemed to have taken even CrossPoint's partners by surprise. Just a month before the plug was pulled on the fund, its managing partner, Seth Neiman, said: "We're moving full steam ahead with our investments in companies that are rewriting the rules of e-business and technology."

Nigel Drummond, chief executive of AIM-listed Internet Incubator, said: "It's a reflection of just how difficult things have become. In the UK, there is a huge weight of VC money, but no one is investing. But people are being realistic; they are not sitting around pretending that things will get better overnight."

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