The rocker’s days as a tech mogul could be ending: A key founding partner is ditching Bono’s private-equity firm, Elevation, in a nasty spat that’s going public, just as the company is trying to launch a second investment fund.
An ugly fight over money is threatening the future of Bono’s Silicon Valley private-equity firm, Elevation Partners.
After several rough years, a key founding partner, Marc Bodnick, is bailing out and fighting with Elevation’s leader, Roger McNamee, over his share of the firm’s profits, according to a person close to the company.
The feud, which has been simmering in private, now is erupting into a nasty public battle after blogs got wind of Bodnick’s plans to leave and join Quora, a hot Silicon Valley startup.
It’s all playing out like an episode of some Silicon Valley soap opera, and it’s happening at a terrible time, just as Elevation is trying to get investors to put in more money so it can launch a second investment fund. If Elevation can’t raise a new fund, the firm eventually will dwindle away, a source in the Valley venture community says.
And that could spell the end of Bono’s days as a tech mogul.
Says a person close to the company: “Elevation’s second fund is very uncertain.”
Bodnick’s departure is a blow for Elevation, which has struggled after some of its biggest investments, such as a stake in mobile-phone maker Palm, failed to pan out.
Bodnick did not return messages. Elevation officially declined to comment about Bodnick, but an insider, speaking on the condition of anonymity, said Bodnick had exaggerated his contribution to Elevation's success.
They’re especially miffed by a recent profile of Bodnick in the San Jose Mercury News in which Bodnick got a lot of credit—too much, the Elevation insider says—for Elevation’s successful investment in Facebook.
“Marc is a great guy. He’s a friend. But if you look at Marc’s background and hold that up to the rest of the group, well, he’s an equal partner, but if you’re going to lose somebody he’s probably the least damaging one to lose,” the insider said.
In other words: It’s getting nasty.
This is all a far cry from the happy days of 2004, when Bono, with much buzz and fanfare, joined with a handful of Valley big shots to form Elevation—the name comes from a U2 song—with the mission of investing in digital media and entertainment companies.
The team included Fred Anderson, the former chief financial officer at Apple, and Bret Pearlman, a former top gun at The Blackstone Group. Their idea was that as the media business moved online, there was a chance to make big money betting on the right companies.
Elevation’s leader, Roger McNamee, is a renowned Silicon Valley investor and aspiring rock star who plays guitar and sings in a rock band “Chubby called Moonalice under the stage name “Chubby Wombat.” He’s also a consummate salesman who is great at convincing people to invest in his funds.
In 2005 McNamee raised $1.9 billion for Elevation’s initial investment fund.
But then came some bad bets, like a 2006 stake in Forbes magazine, which has suffered a steep decline and is almost certainly worth a good deal less today than it was back then. (Full disclosure: I was working at Forbes at the time of the Elevation investment).
The biggest flop was Palm, which McNamee described as a “bet the firm” investment. Elevation invested $460 million in Palm in 2007, hoping Palm could take on Apple and Google in the smartphone wars. But Palm fell short, and in 2010 was sold to HP. Elevation claims it made a 5 percent profit on its investment. Not a disaster, but by no means a success.
The one deal that has saved Elevation involves Facebook. Elevation has put $210 million into the social networking site by purchasing shares sold by Facebook employees, at a valuation of $15 billion. That’s looking very smart these days, since in a recent round of funding from Goldman Sachs, Facebook was valued at $50 billion—meaning Elevation has tripled its money.
The Facebook deal also seems to be the one that Bodnick and McNamee are fighting over. Both men have close ties to Facebook. McNamee was an early adviser to Mark Zuckerberg, Facebook’s founder and CEO. Bodnick, meanwhile, is the brother-in-law of Sheryl Sandberg, Facebook’s chief operating officer. Sandberg, in turn, is the person who introduced McNamee to Bono.
Elevation can’t cash out on Facebook until the social networking site goes public, which is probably a year or two away. Bodnick, by leaving now, presumably will give up some of his share of that windfall. That’s what typically happens when a partner leaves before a fund has run its course.
But apparently Bodnick believes that because he played a big role in the Facebook investment, as well as an investment in Yelp, a fast-growing Internet company that still has a chance of returning a profit to Elevation, he’s entitled to a substantial share of Elevation’s profits.
The spat is happening as Elevation is trying to raise money for a second investment fund. The Elevation insider says Bodnick is making a stink now as a ploy to “create leverage for himself” as he argues with McNamee over how much he should share in Elevation’s profits.
Whether Elevation, with its spotty track record, can convince investors to put in more money remains to be seen—especially if investors believe the guy responsible for the smart bets is now leaving. Says a person close to the company: “Elevation’s second fund is very uncertain.”
If Elevation can’t raise more money, the firm will nurse along its existing investments, but eventually dwindle away. McNamee, who has now created three Silicon Valley investment companies, probably could start another. Or maybe he’ll just stick to playing in his band. And Bono? Between his work in Africa and touring with U2, he’s probably got enough on his plate, too.
Dan Lyons is technology editor at Newsweek and the creator of Fake Steve Jobs, the persona behind the notorious tech blog, The Secret Diary of Steve Jobs. Before joining Newsweek, Lyons spent 10 years at Forbes.
For inquiries, please contact The Daily Beast at firstname.lastname@example.org.
- Elevation Partners
- The Blackstone Group
- Silicon Valley