Mercury News | 08/05/2002 | Venture capital funds shrink
Though investors had technically “committed” their capital to venture firms, most venture firms gave back some of the money to generate goodwill. Investors pay management fees on the uninvested capital — recently estimated by the NVCA at almost $200 billion — and this year started to complain venture firms weren’t investing it quickly enough. They said the venture firms had more money than they knew what to do with.
The most public spat came at Palo Alto’s Accel Partners, when some investors rejected Accel’s initial plan to simply halve its fund into two smaller funds, and not give money back. Accel recanted and gave back $461 million.
Accel must think its investors are fools to try and pull off a scam of this magnitude, but given the nature of their networking investments over the course of the past decade, such an idea would be simple projection. The bottom line is that any company with Accel as a lead investor is probably flaky.