Avalon Ventures, Coming Off Zynga Investment, Raising 10th Fund

7/31/12Follow @bvbigelow

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San Diego’s Mogl, AnaptysBio and Awarepoint.

Much of the Dow Jones report concerns the value of Avalon’s stake in San Francisco-based Zynga (NASDAQ: ZNGA). Kinsella told me a couple years ago that Avalon’s $5.3 million investment in the maker of casual games like FarmVille and Mafia Wars would probably yield the firm’s biggest returns.

But with Zynga stock now trading around $3.09 (the company’s valuation is about a third of what it was at the time of its IPO), the Dow Jones report suggests the value of Avalon’s stake in Zynga has shrunk as well. It notes that Avalon sold a small portion of its stake in early 2011, but retained 34.7 million Class B Shares—a stake that was worth roughly $347 million at the IPO price of $10 a share.

It’s also possible, though, that Avalon conveyed some of its Class B shares to Zynga’s founding CEO, Mark Pincus. As Connie Loizos noted yesterday at peHub, Zynga disclosed in a regulatory filing last week that Pincus now controls just over 50 percent of the total voting power as of July 24.

“It’s not entirely clear when, but apparently investors in Zynga Class B stock sold their shares to Pincus,” Loizos reports. “Since Class B shares are entitled to 7 votes (as opposed to 1 vote for Class A shares), that pushed Pincus over the 50 percent hurdle.”

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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