Boston venture capitalists and others in the investment community were loath to blame economic conditions for the collapse of Boston-based venture capital firm OpenView Venture Partners, which this week told its limited partners it will be winding down operations.
In fact, some said it's an opportunity for another later-stage VC fund to take its place.
Partners and others at OpenView have not responded to multiple requests for comment, and have said nothing publicly about why OpenView decided not to move forward with another fund. Media reports citing unnamed sources have reported that two of its three leaders abruptly announced plans to leave the firm.
Firas Raouf, a limited partner and former investing partner at OpenView, told the Business Journal on Tuesday that the firm wouldn’t be making any investments from its $570 million seventh fund, which it closed earlier this year. Instead, Raouf said the funds will be returned to the limited partners and OpenView will focus on supporting existing portfolio companies.
Members of the Boston VC community and the industry trade group New England Venture Capital Association (NEVCA) said worsening economic conditions were unlikely to be why OpenView decided to abandon its latest fund and part ways with its investment team.
OpenView’s $570 million, seventh fund — 25% larger than its previous, sixth fund — fell short of its initial target of $800 million.
“VC and startups is a tough business in the best of days, and recently it's certainly been even more challenging," Ari Glantz, executive director of the NEVCA, told BostInno. "But the biggest obstacle facing venture capital firms in this environment has been fundraising, and OpenView raised a substantial new fund earlier this year, so I’d be hard-pressed to peg the recent developments to market conditions.”
Boaz Fachler, a principal at Link Ventures, said he doesn’t think OpenView's failure should be taken as a bad economic signal for the Boston venture capital community at large: "Leadership disputes are natural, and sometimes lead to harsh outcomes,” he said.
But Michael Greeley, general partner at Boston-based Flare Capital Partners, said that even though the market may be overcapitalized, firms could still be losing money, leading to internal pressure at firms.
“If there were tensions before in the good times, those tensions get really magnified in the bad times,” Greeley said.
Greeley said the news about OpenView came as a shock, now he's wondering if it could be an “omen of other bad news to come in our industry.”
The past 18 months have seen a correction in the venture capital world, after several years of sky-high fundraising and valuations. A 2023 mid-year report from Pitchbook and the National Venture Capital Association found that funding, exits and fundraising by firms were all down from the year prior.
Who will replace OpenView's late-stage VC strategy?
The loss of OpenView, one of the few local growth-stage firms, is being seen as an opportunity for other VCs to step into its place.
“This was one of the few later-stage funds in the Northeast, and it leaves an opportunity for a new player to come in and diversify the funding landscape,” said Senofer Mendoza, founder and general partner of Boston’s Mendoza Ventures.
Greeley said while OpenView didn’t only invest in Boston-area companies, it was “quite visible” in the local market.
As the startups that were created during 2020 and 2021 — when venture capital funding was flowing rapidly — mature and seek additional rounds, Greeley said there will be fewer options for fundraising.
“We created a lot of early-stage companies and they’re all coming back to market and we just don’t have that many firms that are active in that space, that kind of growth-stage venture market,” Greeley said.
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