I'm developing a few columns related to the venture capital world, so this afternoon I had a chance to chat by phone with IDG founder and chairman Pat McGovern.
One topic I wanted to ask him about was the split between IDG and the former IDG Ventures Boston team, which rebranded itself last month as Flybridge Capital Partners.
I'd run into Jeffrey Bussgang last week, one of the original partners at IDG Ventures Boston. He said that there were no hard feelings between IDG and the Boston investing team... but that IDG had chosen not to put money into the new $280 million Flybridge fund, after participating in two prior IDG Ventures Boston funds.
McGovern told me this afternoon that when the IDG Ventures Boston team asked how much he wanted to invest in their third fund, he said that he'd been getting better returns investing outside the US. (McGovern and IDG have funds in China, Vietnam, India, and Korea, among other places.)
"We didn't think the returns were competitive with the returns we could get elsewhere," McGovern said.
He was also bothered by the Boston team's desire to do more investing outside of New England and the East Coast. "They didn't want to stay east of the Mississippi," McGovern said, and they wanted to invest in some sectors outside of pure IT. (Another IDG fund is based in San Francisco.) "Your goals and the IDG brand are no longer aligned," McGovern said he told the Boston team.
"We agreed, they'll change their name, and raise money from people other than IDG," he said. (In 2005, when the Boston team raised its second fund, a $180 war chest, IDG had put in $25 million.)
Oddly, McGovern, who gave $350 million to MIT to start the McGovern Institute for Brain Research, said he thought the Boston team's forays into med-tech and diagnostics, like Predictive Biosciences'
urine-based cancer tests, were too much of a stretch. "They were getting into areas where the...technology was no longer the major competitive advantage."
But McGovern said that "we're hoping that they do extremely well," referring to the new Flybridge fund. "We still have a lot of cash at stake in funds I and II." He said the team's historical returns had been "better than average."
McGovern is not totally pulling out of U.S. venture investing, however. McGovern said he's supporting a second IDG Ventures San Francisco fund, currently being raised. "We're putting 25 percent of the money into the new fund, which is a month or two away from closing at $180 million," he said.
I also spoke today with Flybridge managing partner Michael Greeley. (Disclosure: Greeley and I serve on the advisory board of the Nantucket Conference together.)
Greeley said, "It's a mischaracterization to say we've gone off-strategy," adding, "[Pat] has great personal interest in the healthcare convergence scene," given his philanthropic activities. Greeley also said that he expected about 80 percent of the new fund's investments to be companies that the partners can drive to from Boston, though he wouldn't rule out doing a seed deal on the west coast (though he termed it "unlikely").
Greeley says one big reason for the name change, and the split from IDG, was that he worried entrepreneurs would confuse his new fund with the IDG Ventures San Francisco fund. He and the other partners said that raising money for this new fund wasn't a problem, even without IDG's allowance: "We did not to an offering memo" to market the new fund, Greeley told me.
He also told me that the firm is looking for new space in the Back Bay, having outgrown its current digs at One Exeter Plaza, IDG's headquarters. "It's a shame not to be able to bring on entrepreneurs-in-residence because you don't have enough space," Greeley said.
(PEHub's Dan Primack served up some inside info on the relationship between McGovern and the new Flybridge fund last month.
Labels: Flybridge Capital Partners, IDG Ventures, Michael Greeley, Pat McGovern, venture capital