Dallas VC Caught in Snow Job?
October 14, 2006
You might be able to pull off a ’snow job’ on Park Cities People or the Dallas Business Journal, but you might want to think twice before you try to pull one on the New York Times. Dan Primack claims that is just what Sevin Rosen did last week in a story I wrote about here. Steve Dow, general partner at Sevin Rosen, claimed the only reason they were bagging their latest fund was related to the fact that there was “too much money floating around.” According to Dan the real reason are related to very serious internal troubles at the firm. They decided to get in front of them by spinning their decision not to raise money as a “postive thing.”
[NYT reporter Gary] Rivlin directed the firm to a Silicon Valley-based reporter named Miguel Helft, who spoke with SRF partner Steve Dow, and who also was given an explanatory letter that had been emailed to prospective LPs. Last Saturday, Helft penned an article that portrayed SRF as being one of the few firms with the courage to pull its money from where its mouth was. Similar press coverage soon appeared elsewhere, as Dow was extraordinarily accessible (as was the letter). He spoke with the Wall Street Journal, CNBC and myself, among others.
I don’t know who organized this press strategy – Dow? SRF marketing director Jennifer Michalski? – but it was extraordinarily effective.…But the bigger problem for Sevin Rosen was that it was no longer in that crème de la crème category. Its first five or six funds – dating back to 1981 – had been absolute knockouts, but its more recent efforts had flagged.
…There also was some occasional strategy drift, as best evidenced by last fall’s decision to lead a $26 million Series D round for Firefly Mobile, which provides cell phones for pre-teens and their parents. Not only was FireFly’s consumer-facing strategy a bit outside of Sevin Rosen’s traditional competency, but it also was a late-stage deal at a pre-money valuation of around $100 million…Nine months later, however, Sevin Rosen wrote off the entire investment, after deciding to not participate in a company recapitalization. There have been a series of other severe write-downs or write-offs in recent months.
Looks like VentureBeat feels they got stung as well. They took Steve Dow’s word on the reasons for the decision, but in their recent post, “Did Venture Firm Sevin Rosen Orchestrate Snow Job?” they indicate that after their story ran, several sources indicated that the real reason for the decision were related to internal differences. Put the best spin on your decisions in your own blog (does SR have a blog?), but don’t pitch a “snow job” to the New York Times - you might just get frost bit!
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