Elevation Partners hits pause by Adam Lashinsky @FortuneMagazine June 23, 2010, 9:35 PM EST E-mail Tweet Facebook Google Plus Linkedin Share icons Roger McNamee (Source: Elevation Partners) Last December I wrote that Elevation Partners was beginning to make noise about raising a second fund, an Act 2 for its less-than-successful, $1.9-billion first effort. Elevation is the private-equity firm started by Roger McNamee, Bono and others that was supposed to focus on next-generation media and entertainment deals but drifted instead into consumer electronics (by buying Palm PALM ), online real estate and tired old media. It recently recruited former eBay EBAY finance guy Rajiv Dutta and Avie Tavanian, once chief of Apple’s AAPL software efforts. Now the noise out of Elevation is about retrenchment. The firm is cutting “fewer than 10″ people, mostly in administrative functions and primarily because it no longer needs extra hands on deck what with HP HPQ taking Palm off its hands. Assuming “fewer than 10″ means nine, and seeing as Elevation lists 13 administrative people on its website, the cuts are deep. It won’t say how many of the 21 investment professionals it lists are leaving, though one, Patricia Wexler, recently sent a note to her contacts indicating she has left. Elevation stresses that its seven top people, including the two new ones, aren’t going anywhere. But that’s not all that interesting. The question for the firm’s longevity is how many of the people below the top level — the ones who show that an institution with staying power is being built — are sticking around. Elevation is an object of scrutiny and fascination because of the outsized personalities and diversity of backgrounds it has assembled. McNamee is a Silicon Valley investing legend, and an eccentric one at that. Bono isn’t an investment professional at all, but is said to have a sophisticated and shrewd understanding of how the entertainment industry works. Fred Anderson is an under-sung hero of the Steve Jobs turnaround at Apple. Yet the ball simply didn’t bounce Elevation’s way. It has downside protection on its investments in Move.com and Forbes Media. Palm, if all goes as planned, will end up being a small gain for Elevation. But small gains aren’t why university endowments pay investing gods massive fees. (Treasury bills pay modest gains for negligible fees.) They also don’t typically pay up for the kinds of investments Elevation has taken a shine to of late, open-market or otherwise small-percentage investments in private companies including Facebook and Yelp. These investments may yet prove profitable, but any hedge fund could have made them, and Elevation won’t add any more value to those companies than Roger McNamee personally would have added if their CEOs had bought him a cup of coffee. Elevation still has about $200 million to invest, and it is looking a couple more investments along the lines of the Facebook and Yelp stakes. Fund-raising is tough for any firm right now, and it’s definitely on hold for Elevation, which doesn’t give its two new stars a way to make serious money, let alone occupy their time.