Exclusive: Skyline Ventures Cuts Partners, Postpones Fundraising

10/26/12Follow @xconomy

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business in some way, either by raising smaller funds for the future, delaying fundraising plans, or getting out of healthcare investing altogether. Morgenthaler Ventures and Advanced Technology Ventures let their healthcare partners split off from their tech partners, to form a fledgling healthcare-only firm called Lightstone Ventures. Earlier this month, we reported here at Xconomy about OVP Venture Partners’ decision to shut down operations after nearly 30 years in business.

Skyline is one of the big names in biotech venture capital, and surely one of the go-to firms for most biotech entrepreneurs pursuing big ideas. The firm, founded in 1997, has about $800 million under management. Some of its more visible winning investments have been in San Diego-based Novacardia (acquired by Merck); Madison, WI-based NimbleGen Systems (acquired by Roche); Louisville, CO-based Medivance (acquired by C.R. Bard); Cambridge, MA-based Sirtris Pharmaceuticals (acquired by GlaxoSmithKline), and South San Francisco-based KAI Pharmaceuticals (acquired by Amgen).

Skyline has also backed a number of companies that made it through the IPO gauntlet, including Santa Clara, CA-based Xenoport (NASDAQ: XNPT), Redwood City, CA-based AcelRx Pharmaceuticals (NASDAQ: ACRX), and Mountain View, CA-based MAP Pharmaceuticals (NASDAQ: MAPP). Some of the younger companies that still show promise in its portfolio include South San Francisco-based Sutro Biopharma, Cambridge, MA-based Genocea Biosciences and Watertown, MA-based Tetraphase Pharmaceuticals.

Hoffman, 58, wouldn’t discuss Skyline’s investment returns over the phone yesterday, and I was unable to find much public data on the performance of its five venture funds, raised in 1997, 1999, 2001, 2004, and 2007. Skyline’s third fund, raised in 2001, appeared to have generated a 4 percent internal rate of return through the end of 2010, according to data reported by the California Public Employees Retirement System (CalPERS), and published by Fortune.

Without getting into details about Skyline’s funds, from good years and bad, Hoffman said generally that the firm has performed well when compared with its peers. It is still receiving and evaluating new business plans, he says.

“We’re not going out of business,” Hoffman says. “We have dry powder, we are making new investments, and we are excited about our portfolio companies.”

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  • Venture Creativist

    We are watching a slow motion VC train wreck as these chaps fight for the last bits of left over cash on hand to keep paying themselves a 3% management fee while providing a whopping 4% return (see below). The Venture industry is dead and the model is broken as a direct result of VC greed, arrogance, lack of transparency, creative vision, or balls. The firms left are now in a mode of self destruction/preservation as they back stab each other, toss out the most Jr. partners and fight for the last few dollars on hand and waste everyones time posing as real investors. “Sorry but your too early for us” is your new tag line. What were ending up with is a bunch of 60 year old guys who have not run a real company in 30+ years and won’t bet on anything that is not revenue positive with 5 years of solid growth, no debt, oh and buy the way we can get a 70% ownership stake for a minor investment with all the screw you in the end provisions we can toss in. Plan B is to keep on booting the young partners to the curb and you can probably whittle the firm down to 2 or 3 partners then the current fund crumbs will get you comfortably to retirement…. just in case the LP’s don’t forget the last 10 years of dismal Venture returns.

    “Hoffman, 58, wouldn’t discuss Skyline’s investment returns over the phone yesterday, and I was unable to find much public data on the performance of its five venture funds, raised in 1997, 1999, 2001, 2004, and 2007. Skyline’s third fund, raised in 2001, appeared to have generated a 4 percent internal rate of return through the end of 2010, according to data reported by the California Public Employees Retirement System (CalPERS), and published by Fortune.

    Without getting into details about Skyline’s funds, from good years and bad, Hoffman said generally that the firm has performed well when compared with its peers. It is still receiving and evaluating new business plans, he says.”

  • Pharma Guru

    VC’s have made investments in drugs and drug discovery platforms that those of us with decades in successful drug discovery and development wouldn’t have given a second look at. They’ve been burned by their own lack of expertise in areas they chose to invest in.