Sevin Rosen Funds

Sevin Rosen Funds (SRF) is a Texas-based[2][3] venture capital firm credited with pioneering the personal computing revolution in the 1980s and also venture investing in Dallas.[4] It was established in 1981[5] by L. J. Sevin, a former Texas Instruments engineer,[6] and Ben Rosen, and was[7][8][9] one of the leading investors on the US West Coast.[10] SRF was involved in the financing of Citrix, Cypress Semiconductor, Electronic Arts,[3] Lotus Development Corporation,[11] Silicon Graphics, Ciena Corporation[1] and Vitesse Semiconductor.[6][12] SRF's first major success was its 1982 investment in Compaq which went public shortly thereafter.[13][14]

Sevin Rosen Funds (SRF)
TypePrivate
Industryearly stage venture capital
FateWinding-up after not raising a new fund for 16+ years[1]
FoundedDallas (1981)
Founders
HeadquartersDallas, Texas
Key people
  • John Bayless
  • Steve Domenik
  • John Jaggers
Websitewww.srfunds.com

Entrepreneurs supported by SRF include: Dennis Mudd (Slacker), James Sabry (Cytokinetics), Dave Vucina (Wayport), Michael Baum (entrepreneur) (Splunk), Nick Gault (XenSource), and Ranjith Kumaran (YouSendIt).

Investments

Before starting Sevin Rosen, Ben Rosen had been a technology analyst at Morgan Stanley, whose conflict of interest rules prevented him from investing in the companies he was evangelizing, such as Apple.[15] After leaving Morgan Stanley, he started investing; most successfully a $20,000 stake in VisiCorp, the inventor of the spreadsheet. He later sold his VisiCorp stock for $800,000, eight months after Sevin Rosen invested in Lotus, the competitor that destroyed VisiCalc.[15] In 1980, he teamed up with L. J. Sevin, who had co-founded the Mostek semiconductor company and sold it for $345 million.[15] First, the pair attempted to start a new semiconductor company, and when that didn’t work out, they raised $25 million for SRF’s first two venture funds with help from Thomas Unterberg.[15] Those first two funds generated annual compounded return on investment of 75% for the few years, thanks primarily to early investments in Compaq and Lotus.[15] Jon Bayless joined the firm in 1981, and several of the subsequent funds included his name.[15][16]

Since 1995, the firm invested in 542 ventures and created billions of dollars for its investors.[1] Investments include Alder Biopharmaceuticals, Capstone Turbine, Ciena,[1] Citrix Systems, Compaq, Cyrix, Cytokinetics, Electronic Arts, NetLogic Microsystems, Silicon Graphics, MetaCarta,[17] and Splunk.[18]

As of April 2003, the firm had raised eight funds and reported having nine general partners, thirty-five employees, offices in Dallas and Palo Alto, and $1.6 billion under management with more than $1 billion invested.[19] The firm continued to focus on semiconductors, software, and telecommunications and mentioned Westbridge Technology, NetLogic Microsystems, and Cicada Semiconductor as examples.[19] Steve Domenik said, ”we look for [technologies] that are a little harder," take longer to start up, and have less clear focus.[19] "We take a lot of technical risk," Domenik said, and prefer to be the first investors in a company.[19]

Controversy: Funds IX & X

SRF raised $305 million in its Fund IX in 2004.[20][21] At the time of raising Fund IX, John Jaggers said, “We believe that limiting investment in venture capital over the next few years, both at the portfolio company level and at the fund level, will be critical to generating superior returns for the venture industry. Our firm is very concerned that there continues to be far too much capital in the venture industry...”[20] By October 2006, it had invested less than 20% of Fund IX,[21] and took the unprecedented step of returning more than $200 million in commitments to the Fund X that it had been raising.[8][22][23][24]

In October 2006, SRF’s partner Steve Dow made a statement to the New York Times, "The traditional venture model seems to us to be broken,"[8] that sparked intense discussion throughout the venture industry about whether too much money was chasing too few deals.[23][25][26] While some agreed,[23] others asserted that SRF had failed to adapt to changing markets.[27] At the time, other firms said SRF had failed to adapt to changing markets and pointed out that none of its partners were under 40.[27][28][29]

In 2008, the firm’s California-based partners Steve Dow, Nick Sturiale, John Oxaal and Steve Domenik split from their Dallas partners were listed on the firm’s website as "partners emeriti."[7]

As of 2014, the Boston Business Journal reported that Jon Bayless "hopes to raise up to $150 million for what would be Sevin Rosen’s first new fund in eight years."[1] By 2018, the firm’s website listed eleven people,[30] six of whom have either retired[31] or joined or launched other VC funds, including Workhorse Capital [32] Ignition Capital,[33] and CIC Partners.[34] A few of the partners still list SRF as “present” on LinkedIn profiles. However, even Jon Bayless on LinkedIn lists a second fund called Bayless Capital above SRF.[35]

Offices

Sevin Rosen’s Dallas office on the 16th floor of Two Galleria Tower was a hotspot for startups and investors. It leased space to other VC firms and had the largest concentration of venture capital firms in the region until Sevin Rosen downsized and moved out in late 2009.[1][36] The fund shut down its Silicon Valley office in Palo Alto in 2008.[7]

Community

The company founded and funded an award that gives recognition to "innovative technical achievement with potential for entrepreneurial success" at Berkeley[37] and a grant for "membership in Austin Technology Incubator."[38]

References
  1. Candace Carlisle (July 13, 2004). "The 'Big D's' biggest VC: Jon Bayless on the hunt for $150M". BizJournals (Dallas Business Journal).
  2. "Sevin Rosen Funds". Bloomberg.
  3. Anupreeta Das (January 4, 2008). "Sevin Rosen venture capital partners splitting up". Reuters. which is known for backing huge successes like Compaq Computer Corp and Electronic Arts
  4. "Dallas Innovates 2019 - Now is the time for North Texas to grab its place in the tech universe". Dallas Regional Chamber Publications. December 31, 2018. Cite journal requires |journal= (help)
  5. Leonard Sloane (September 28, 1981). "New Venture Capital Firm is formed". The New York Times.
  6. "BusinessDallas: The 16th Floor". D Magazine (Dallas).
  7. Buckman, Rebecca (January 4, 2008). "Sevin Rosen Funds Plans to Split Up, Joining Recent Trend in Venture Firms - Backer of Compaq In '80s Has Faced Struggle for Profits". Wall Street Journal.
  8. Miguel Helft (October 7, 2006). "A Kink in Venture Capital's Gold Chain". The New York Times.
  9. "Seven Rosen Funds - Portfolio". Retrieved January 2, 2021. The active funds managed by Sevin Rosen are fully invested. As such, any future investments will be limited solely to companies already in the Sevin Rosen portfolio.
  10. Andrew Zacharakis, William D. Bygrave (2019). Entrepreneurship. John Wiley & Sons. p. 336. ISBN 978-1-119-56322-8.
  11. Esther Dyson (October 13, 1997). "The Accidental 'Techie'". Newsweek. pp. 79–86. Ben Rosen .. Lotus founder Mitch Kapor ..funding for
  12. Quote: The best stories ... millions of dollars in venture capital .. builders of Compaq and Convex Computer, Mostek and Cypress Semiconductor, CIENA, Intecom, and dozens of other successful technology companies.
  13. Essentials of managerial finance. Dryden Press. 1987. p. 82. ISBN 978-0-030-09967-0.
  14. Tim Kellis (2007). Equality: The Quest for the Happy Marriage. Sevin-Rosen's most famous investment was in providing the seed capital to Compaq Computer for manufacturing the first laptop PC in the early 80s
  15. Sherman, Stratford P.; Elliott, Margaret A. (September 30, 1985). "TECHNOLOGY'S MOST COLORFUL INVESTOR - Thanks to tireless promotion and successful investments in Lotus and Compaq, Ben Rosen has risen to the top rank of venture capitalists. He's now bringing a risky software start-up into a market bored with computers". FORTUNE Magazine.
  16. "Form SC 13G Sevin Rosen Bayless Management Co - SC 13G - Statement of acquisition of beneficial ownership by individuals". SEC. February 14, 1997. Cite journal requires |journal= (help)
  17. "MetaCarta maps out path to $6.5M in second round". Boston Business Journal. January 5, 2004.
  18. "SRFUNDS.COM". www.srfunds.com. Retrieved February 14, 2019.
  19. Reisinger, Jenny (April 14, 2003). "Funding With Sevin Rosen Funds". The Wall Street Journal.
  20. Clarke, Peter (July 28, 2004). "Sevin Rosen closes ninth fund with $300 million".
  21. Meikle, Brad (March 26, 2007). "Sevin Rosen fancies Texas". Buyouts Insider.
  22. Primack, Dan (October 13, 2006). "Sevin Rosen Revisited".
  23. Primack, Dan (April 20, 2012). "Splunk proves VC model was not 'broken'".
  24. Marshall, Matt (October 7, 2006). "Venture shocker: Sevin Rosen returns cash, cites "terrible" environment".
  25. "SRF Eats Crow with XenSource Sale". Venture Capital Journal. September 1, 2007.
  26. Wilson, Fred (October 7, 2006). "Is The "Traditional Venture Capital Model" Broken?".
  27. Meikle, Brad (November 1, 2006). "Sevin Rosen says model is broken, peers say firm is stuck in neutral". Buyout Insider.
  28. Price, Will (October 9, 2006). "Poison the Well".
  29. Marshall, Matt (October 13, 2006). "Did venture firm Sevin Rosen orchestrate snow job?". Venture Beat.
  30. "Seven Rosen Funds - Team". Archived from the original on November 12, 2018.
  31. "Charles Phipps". Retrieved January 2, 2021. Retired from firm, continues as a partner for funds VI, VII, and VIII.
  32. "Dave McLean". Retrieved January 2, 2021. Mr. McLean (56) co-founded Workhorse Capital in 2016.
  33. "Nick Sturiale - Managing Partner". Retrieved January 2, 2021. Nick Sturiale joined Ignition in 2013 as managing partner and oversees the Los Altos office.
  34. "Alan Buehler - Chief Financial Officer and Chief Compliance Officer". January 2, 2021. Alan Buehler joined CIC Partners in 2016 as its Chief Financial Officer and Chief Compliance Officer. Prior to joining CIC, Alan served for over ten years as the CFO of Dallas-based Sevin Rosen Funds.
  35. "Bayless Capital - About". Retrieved January 3, 2021.
  36. Tam, Pui-Wing (October 12, 2009). "Echoes on 16th Floor: Venture Capital Exits".
  37. "Student Award: Sevin Rosen Funds Award for Innovation".
  38. "Sevin Rosen Funds sponsors grant program". January 17, 2006.


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