Time was (and that time was not all that long ago) that the departure of a recognized general partner/managing director at a similarly recognized venture firm would be a buzzworthy 2-3 day story within venture circles. Turn that “departure” tale into one where the departure involved that same investor joining a competitor firm and tongues would be wagging for some time.
In just the past few days, word has come out of the NVCA annual meeting that not one, but at least four, well-known and well-respected GP-level investors have left their respective firms to — in most cases — join a rival firm. If not unprecedented, this revelation certainly strains my memory to recall anything remotely similar in recent years. To be sure, partners retire. Other times, particularly when a firm has suffered poor returns or during a market downturn, partners are sometimes asked to, ahem, “make other career arrangements.” This is often so the firm can retrench or reposition itself; it can also just be because of a strategy shift or because there has been internal rancor in the partnership for some time and, as such, a decision was reached to make a change.
Regardless of the particular circumstances, in virtually all cases there have been carefully planned transitions and sealed lips on where things went off the rails in these investor-partnership relationships. “Smiles and handshakes all around” is often the party line.
While I send my best wishes to all those investors who have recently moved to new firms, I do ask myself whether this is a harbinger of things to come in the industry. To state that many partnerships have been under strain in the past year is to state the obvious to anyone with regular dealings in this industry. Conventional thinking has long held that continuity is critical in investment partnerships. I think that belief is going to be strained. It is a truism that many limited partnerships, when considering an investment in a venture fund, look at the continuity and ties of the investment team. This is particularly the case when you are talking about venture funds that typically have a 10-year life. That said, with this spate of recent departures — and the community’s response to them by taking the news in stride, for the most part — one has to wonder whether we are entering a new period in the venture community where “moving across the street” from one firm to another much in the traditional style of investment bankers or corporate attorneys will become the norm in the venture community. I don’t have a crystal ball here, but I am anxious to hear other people’s viewpoint.