Home > Blogs

Warner tried to spread the wealth

But venture funds failed; management, timing cited

By Jennifer Haberkorn THE WASHINGTON TIMES | Sunday, July 6, 2008

Article
Comments ()

Four of the five venture capital funds set up by former Gov. Mark Warner a decade ago as a way to infuse central, southern and western Virginia with much-needed cash for technology start-up companies have since folded or are in the process of shutting down, failing to spur the economic growth he once championed.

Mr. Warner, a Democrat now considered the front-runner in the U.S. Senate race in Virginia to replace retiring Republican Sen. John W. Warner, no relation, created the funds as a private citizen before his 2001 election as governor. He used his own money - between $1 million and $5 million, he says - coupled with investments from university foundations, corporations and individuals from five diverse regions of the commonwealth.

The five venture capital investments were created after Mr. Warner's unsuccessful 1996 Senate campaign, but four of them failed to make much of a return for their investors and closed or are in the process of closing, according to interviews with investors and some fund managers.

A fifth, Envest Ventures, has raised more than $160 million in three rounds of fundraising but makes only half of its investments in Virginia.

Designed to infuse young technology firms with much-needed cash, venture capital investments generally are made by groups of third-parties in exchange for a share in the invested companies. The ventures often are risky because the companies could flop.

The investments "for the most part, did not turn out to be financial successes," said Irving Groves Jr., who co-manages the fund for southern Virginia. "This fund at least found it very difficult to locate investments that the investment committee felt would be beneficial for the communities and the investors."

Mr. Warner and other investors said the funds floundered because of poor management and poor timing - they were created just before the stock market crashed in 2000, prompting scores of technology companies to fold.

"The idea was the right idea. I'd do it again," Mr. Warner told The Washington Times during an interview last month. "The timing was bad and in certain cases, the execution was bad."

The five funds - Southwest One, Monument Capital Partners, Southside Rising, Envest Ventures and Shenandoah Capital Ventures - targeted different geographic areas around Virginia. Four of the funds - Envest, which focused on the Hampton Roads area, is the exception - have closed or are in the process of closing without returning much of their investments.

For instance, Monument Capital, which started closing down last year, targeted the Richmond area. It raised about $20 million from investors but returned approximately $1 million.