As Lehman Brothers sells off its assets following its bankruptcy, there is still a big question as to what will happen to its venture arm and, more importantly, how any change in ownership will affect the companies in which Lehman Brothers Venture Partners holds a stake. Like many investment banks, Lehman got into venture investing in the mid-1990s to try to capture some of those venture returns. The investment management group that it was a part of was sold off to Bain Capital and Hellman & Friedman on Monday, but the venture arm was not part of that sale. Instead, Lehman Brothers Venture Partners is trying to spin itself off as a separate venture firm with about $800 million in assets.
But if it cannot do that, it will either go to hungry creditors or a financial buyer who may be more interested in liquidating the fund than in nurturing the startups in its portfolio. 
Those startups include Kayak, SearchMe, Jaxtr, Endeca, and about 80 more. (A partial list from CrunchBase is below. Other than comScore, most are still private). They could wake up tomorrow and find that they have a new shareholder who is even more impatient for a quick exit than its existing ones. It’s like being an orphan and wondering who your next foster parents will be. That can really mess with a startup’s development.
And this scenario may not be limited to Lehman Brothers. As other investment banks rethink whether they should be in the venture business, many more startups could find themselves with new shareholders. What if Goldman Sach, Morgan Stanley, or JPMorgan decide to get out of the venture business as well?
| Company | Date | Round | Size | Participants |
| Clear 1 | 8/08 | Series D | $44.4M | 7 |
| Palo Alto Networks 2 | 8/08 | Series C | $27M | 4 |
| Jaxtr 3 | 6/08 | Series B | $10M | 1 |
| Nile Guide 5 | 6/08 | Series B | $8M | 4 |
| SearchMe 6 | 5/08 | Series E | $12.6M | 8 |
| Kayak 7 | 12/07 | Series D | $196M | 9 |
| SearchMe 8 | 10/07 | Series D | $15M | 3 |
| PowerReview 9 | 9/07 | Series B | $15M | 3 |
| Kontera 10 | 8/07 | Series B | $10.3M | 3 |
| Tumri 11 | 6/07 | Series B | $10M | 3 |
| Kontera 12 | 7/06 | Series A | $7M | 2 |
| Endeca 13 | 6/04 | Series C | $15M | 6 |
| comScore 14 | 6/02 | Series D | $20M | 7 |
| comScore 15 | 8/01 | Series C | $15M | 5 |
| SideStep 16 | 10/00 | Series A | $6.8M | 2 |
| SideStep 17 | 12/99 | Series A | $2.2M | 1 |
Ohh boy that would not be fun at all. There are some substantial rounds here and I don’t think anyone is going to forget about the investment. It would be interesting to see what Kayak think about all this.
Thanks for pointing this out.
Cheers – Eric
Another excellent research Erick. Double thumbs for you.
good.
Here’s a thought get this guy to “contribute:
Pay in $ in 2008:
Status of bank or CEO
Lehman Brothers
Richard Fuld
NYT: 22,1M
BizJ: 34M
He obviously is an experienced risk taker with plenty of $$$.
if they are smart they will take the money and run.
now that daddy warbucks has died.
get all you can, best believe lemans got all they could before they closed shop.
BankruptcyLocator.com- it can be a good thing.
How do you guys choose and search for the lovely images to headline your posts?
Google Images… LOL.
quite sure secondary funds are actively bidding on these assets as we speak. I’m sure the bankruptcy courts want to bring closure to Lehman ASAP.
This is a great post, especially with the Bailout Bill still pending. I don’t think people realize that the little guys, small and medium sized business owners, have a lot to lose not only from these companies going under but from not being able to finance new entrepreneurial endeavors. Let’s hope we get a handle on this soon.
Here’s one you left off the list. Nextivity Inc.
http://www.next.../investors.html
Their site makes them look second-tier but they’re solving a big problem – crappy indoor cell reception, which is a big impediment to people dropping their landlines. Apple should seriously buy these guys if their box works as they say it will.
Yeah, I’m an idiot. Goldman invested in Nextivity. But if Nouriel Roubini is right, this comment will apply to the story you’ll be writing in a week or two
thanks for the info. really good
This crisis in the financial world has been quite a tornado. So it is uncertain the future for these companies.
too bad too sad lol
Great post – the [not] funny part of all of this is it’s going to be a yardsale and we’re all going to be the ones paying for it – on both ends.
See
http://www.twoitter.com and http://www.tooitter.com is for sale!
looks as if many of these are going to be sold off as there is no funding left from Lehman, anyone wanna go in halvers?
http://jwojdylo.wordpress.com
First, since the Lehman VC team is trying to spin out, the most likely scenario is that it replaces one of its LPs and then continues to operate. This would have about zero impact on its portfolio companies unless you think Lehman’s oversight somehow mattered in their role to their startups. Maybe there would be a small distraction up front as it set up its infrastructure to operate on a standalone basis, but this is an insignificant point.
But even if the Lehman fund liquidated by selling outright to another investor…why would that new investor (who would undoubtedly be a minority owner as per Lehman’s VC business model) think that it could walk in the door and suddenly force anything to happen that wasn’t going to happen anyway?
The bottom line is that the impact to the actual companies is likely to be small other than, worst case, one less investor willing to pony up into a subsequent round.
Common Sense is right. Lehman is only a 20% LP for LB Venture Partners new fund ($75M of $365M – see link below). They have a good portfolio and can’t imagine that someone won’t buy out Lehman’s LP position. Most likely impact on their portfolio cos will nothing at all.
http://www.lehm...ure_V_Final.pdf
hard times, I know few guys who got laid off from lehman earlier in the year. Startups are going to do good though..
http://gatesand...s.blogspot.com/
looks like a good list of startups that have plenty of funding with Lehman. not a huge problem in most of these cases. Similar to the FT Ventures rumors, this is blown a bit out of proportion.
Correction: looks like a good list of startups that have plenty of funding support without Lehman. not a huge problem in most of these cases. Similar to the FT Ventures rumors, this is blown a bit out of proportion.
It seems like there is potentially a big problem: Acquisition of the Lehman Ventures portfolio as a stand-alone package triggers a valuation of the component companies. For the privately-held companies this could be a bad thing, devaluing their currently mythical stock pricing, and leaving the remaining preferred shareholders with a portfolio loss. The incentive in that scenario could be to ramp up M&A activity, try to exit with the cash pronto. I’m just guessing here..
Do you have any idea what you’re talking about? Do you think the fund will be purchased at a discount and why? Do you know the valuations on these investments? Do you know the size of the remaining unfunded commitments in the latest fund? What’s your “guess?”
good job erick. liked the list and pic too
Do you think it would reduce the world crisis more sooner? What do you think of it?
I think the table confused NileGuide and RealTravel…I don’t think RealTravel has investment from Lehman
its a very good post
very information for my research about lehmann brothers and after 