Atlas closes $283m fund – less than hoped, but good for early stage

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Atlas Venture has closed its eighth fund (Fund VIII), which comes in at $283 million. The bad news is it’s smaller than Fund VII ($385 million) and comes in well below their original target off $400 million. The good news is that it’s amazing that there are still VC houses out there raising any funds at all in this car crash of an economy. And more importantly for startups they will be really zeroing-in on early stage startups – in part becuase the fund is smaller – which is great news for good entrepreneurs with great ideas and teams who have drawn a blank so far.

The company is spinning the reduced fund as a positive thing, of course. “The new fund is the right size for our early-stage focus and organisational structure,” said Jean-Francois Formela, partner.

Amongst VCs themselves some will snipe about the “size” of each-other’s fund, but frankly if a startup secures backing, who cares. One of the go-to guy for tech startups in particular will therefore be the same guy as before: Fred Destin, a VC who also doesn’t mind firing off a few opinions on his blog now and again.

Destin told me that the new fund will be used to follow Atlas’ strategy of “Prove, Build, Scale”. In other words put a relatively small round into a team they think are good, then build it from there – something they did with Seatwave with a $3m A-round which went on with B and C rounds.

But he also told me – something I have been hearing all over – that it’s going to be tough out there and the days of VCs funding “one man bands” are well over. “Good entrepreneurs should instead team-up together and create kick ass teams,” he said. They’ll look for the usual criteria: great teams (“we don’t mind how early stage they are”), good product which “show promise”, and companies which are already accelerating (“booking 5-10 m euros in revenues”).

The stealth-mode cloud computing startup CloudSwitch is its first investment out of Fund VIII, Matrix Partners participated as well. CloudSwitch was founded by entrepreneurs Ellen Rubin, formerly of Netezza, and John Considine, formerly of Pirus Networks (acquired by Sun Microsystems).

Atlas’ news means it can at least now look Accel and Balderton in the eye, both of which recently raised new funds. (And BTW, my Balderton sources say they are going to do early stage funding, contrary to my post at the time). With a cool $430m to play with in Europe, Balderton is viewed by some as the strongest over here right now, but it’s touch out there for VCs (I know, you’re crying inside, right?). I understand Doughty Hanson and DFJ Esprit have yet to close new funds and neither has Sofinova in Paris. At least, that’s what my sources say.

The smaller Atlas fund also means some personnel changes. Boston-based IT partner Ahmet Ozalp and London-based IT partner Martin Gibson are leaving. Boston-based IT partners Eric Hjerpe and Barry Fidelman move into venture partner roles. Life sciences specialists Bruce Booth becomes partner, and COO Jeanne Henry has retired. In Europe they have the continuation of the lineage with, Graeme O’keefe (who’s into wireless broadband), Destin ( Digital media and ecommerce) Max Neiderhoffer (a senior assiciate who loves gaming platforms) and long-time partner Christopher Spray.

VC houses remind me of monasteries (especially when they go on about “succession”) – one Abbot retires, another takes their place to continue the investment in scrolls…

  • Mark

    This isn’t too surprising; in fact, it’s starting to become a trend. Funds will be settling for a smaller portion of AUM, so we’ll likely get back to $250m-$500m funds being the higher end and the >$1b funds will be the exception. I wrote a little about these trends recently ( ).

  • Darren

    well you have to wonder whatelse investors are going to do with thier money.

    The markets are just as bad and at least with these funds they know the risk and track records of those involved.

  • Sam

    We need a website to help us find good members to add to teams, could work through linked in.

    Essentially people with:
    – Management skills,
    – Interested in joining a startup
    – Previous experience in a specific category (Project management, Finances, CTO, COO, CMO etc)
    – Sectors of interest
    – Location

    Then people can find these people to build their teams, go for a coffee, express their interests etc.

    Right now its difficult to find talented management without having a large network of people who can introduce you.

  • Peter G. Gore

    Perfect fit for them last I heard owners want a lot for it

    • Max Niederhofer

      @Peter: believe me, I am waiting for the day they get sold to some behemoth who changes the name. Then I can finally be

      @Mike: you got my name wrong, dude :)

  • Shafqat

    Good news for Atlas. I’ve met with them, and they are all really good guys. Max & Fred are smart… I always thought their web portfolio doesn’t stack up to the quality of the guys working there. Hope it changes with the new fund. Congrats.

  • Rahul

    During the times when all you hear is layoffs, downsizing and companies filing bankruptcy… its a breather for start-ups … a silver lining to keep doing in their dark basements whatever they are aspiring for !!!

  • Fred Destin

    @shafqat: ouch ! we need to invest in newscred!

  • Martin

    @Sam – yes- this seems a depressing read for an inventor who us bootstrapping (mainly using state aid).

    The last thing I need at the moment is a management team – that will be one of the reasons I will be looking for funding.

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