Elevation Said to Tell Investors No New Fund Is ComingPui-Wing Tam and Sabrina Willmer
Elevation Partners LP, a private-equity firm operated by Silicon Valley veterans and U2’s lead singer Bono, has decided not to raise a new fund.
In a letter to shareholders yesterday obtained by Bloomberg News, Elevation’s seven partners -- which include Bono, Roger McNamee and former Apple Inc. executives Avie Tevanian and Fred Anderson -- said they aren’t raising a new institutional vehicle and are instead planning to focus on investing their own money through a private fund.
“We are quite confident we could raise another institutional fund,” the partners wrote. “However, since the expiration of our investment period in 2010, we have been enjoying the flexibility and have had great success investing our own capital with friends and family.”
The decision ends a public chapter for Elevation, which was founded in 2004 in a blaze of publicity and trumpeted an investment style that involved taking significant stakes in larger-capitalization technology and media companies. With Bono as a frontman, Elevation finished raising money for a $1.9 billion fund in 2005.
Elevation was discussing raising a new $1 billion fund in 2012, a person familiar with the matter said at the time. No fund resulted, though the market for private-equity fundraising has improved.
Buyout firms are currently raising the most capital since 2008 as institutions, including pension funds, which have benefited from a rising stock market, seek to commit more to private equity. A record 2,205 private-equity funds are seeking $774 billion, up from 2,098 funds gathering $733 billion at the beginning of the year, according to data by London-based research provider Preqin Ltd.
A representative for Menlo Park, California-based Elevation declined to comment.
The firm has run into perceptions over the years that it made bad bets. Elevation announced a $325 million investment in struggling smartphone maker Palm Inc. in 2007, which it later upped to a total of $469 million. It also took a stake in publisher Forbes Media LLC in 2006 as the magazine industry was undergoing upheaval, investing a total of $268 million.
Elevation eventually realized a 5.4 percent gain on its Palm investment when Hewlett-Packard Co. bought the company in 2010, and recently almost made back its money in Forbes, which was sold this year to a collection of investors led by Integrated Asset Management (Asia) Ltd.
Elevation had bigger hits with investments in Facebook Inc. starting in 2009, as well as local-reviews site Yelp Inc., which it put money into in 2010. Facebook and Yelp later went public, delivering returns of about 4.5 times for Elevation on both deals, according to the letter.
The firm also made money on a 2005 investment in Move Inc. and an investment that same year in video-game makers BioWare Corp. and Pandemic Studios LLC, according to the letter. It lost money on an investment in subtitles company SDI Media Group Inc. and has one unrealized investment remaining in analytics company MarketShare.
In total, the 2005 fund has realized proceeds of 1.85 times invested capital, or $2.89 billion, Elevation said in its letter. The fund is set to eventually return 1.9 times capital with its investment in MarketShare, the firm said, putting it in the top 30 percent of all 2005 funds.
“Combining our investment philosophy with top operators in our sector resulted in the performance that we told you we expected to achieve when we raised the fund in 2005.”
Elevation has a vast network of contacts in Silicon Valley, developed through its partners such as McNamee, who is well-known as a local musician with his band Moonalice. The firm has had other Silicon Valley executives as partners through the years, including former Electronic Arts Inc. CEO John Riccitiello and Marc Bodnick, head of business at question-and-answer website Quora Inc. Former EBay Inc. executive Rajiv Dutta was also a partner.
Elevation’s partners have invested personally over the past few years through their private fund, dubbed Elevation Investors II, in startups such as room-sharing service Airbnb Inc. and audio products company Sonos Inc., the letter said.