Drama at Harvard-Linked Xfund Costs VC Firm $50 Million

  • Firm will start investing again after founders clashed
  • Xfund said it terminated one partner after a public spat

Xfund, a venture capital firm started by Harvard University alumni, said it will begin making new investments in its portfolio companies after a falling out between two founders caused the firm to halt operations.

However, the fund’s backers, which include prominent Silicon Valley VCs, will cut their commitments in half, reducing the size of the firm’s current fund to $50 million, said a spokeswoman for Xfund. The firm said that it moved to “terminate” co-founder Hugo Van Vuuren and that Patrick Chung is expected to take over management responsibilities.

Paul Marnoto, an attorney for Van Vuuren, said they had not been notified of the changes. Marnoto said the removal of Van Vuuren from the firm would mean Chung is “violating his fiduciary responsibility.”

Xfund investors voted in January to halt new investments amid drama involving the founders. Chung had filed a restraining order application in March against Van Vuuren in state court in San Jose, California, which has since been withdrawn. In the filing, Chung said Van Vuuren had threatened him. Van Vuuren responded in court filings, saying that Chung was creating a toxic environment for staff and trying to remove him from the firm.

Saudi Arabian Oil Co., the state-owned oil company known as Saudi Aramco, is among Xfund’s backers, along with New Enterprise Associates and Jim Breyer, who helped provide early financing to Facebook Inc. Xfund is an investor in genetics company 23andMe Inc. and other technology startups.

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