When a venture capital firm hasn’t raised a new fund in nine years and the majority of that fund’s partners have since moved on to other things, it usually is safe to assume that things didn’t go very well.

That certainly seemed true for Bay Partners, a Silicon Valley venture firm formed in 1980 before effectively collapsing in the mid-aughts. Until it quietly rose from the ashes into the top quartile.

Bay Partners was founded in 1976, and raised a total of eleven funds. Great performance in the early years through the mid-1990s, but it somehow managed to falter while the dotcom bubble was lifting up most everyone else. The firm raised a large tenth fund in 2000 (which later was cut back to $385 million – as part of a broader post-crash trend) and even eeked out $290 million for a successor fund in 2005. But partners soon began jumping ship or, in some cases, were pushed off by firm co-founder Neal Dempsey. A trio of younger partners were promoted, but in 2010 left en masse. At that point, the firm’s tenth fund was performing worse than any other fund that had cut its size, with an IRR of negative 11.2%. Dempsey was effectively all alone, but soon hired veteran VC Stu Phillips to help manage out the legacy portfolio. And most of Silicon Valley stopped paying any attention.

But here’s the thing: Bay Partners actually had a lot of future winners in that legacy portfolio. Examples include Dropcam (bought by Nest Labs for $555 million), Zenprise (bought by Citrix for $327 million), Buddy Media (bought by Salesforce for $745 million), Eloqua (went public, then bought by Oracle for $957 million), Oncomed (went public, current $530 million market cap) and Guidewire (went public, $3 billion market cap). Plus more than two dozen still-private companies, including 2015 IPO candidates like LendingCub, Apigee and Xactly.

As a result, returns have improved dramatically for its last two funds. Dempsey says that Bay Partners X has a 7.14% net IRR through the end of Q1 (9.8% gross IRR) and Bay Partners XI has a 10.57% net IRR (12.92% gross). Both likely would be top-quartile for their vintages, at least based on the unreliable benchmarks upon which we are forced to rely.

“A lot of the investments that we made took forever to mature,” Dempsey says. “Guidewire is a good example. We did the deal in 2002 and it went public in 2012. Or Eloqua, which we did in 2000 and it went public in 2012. Our LPs were wondering what had happened to us, and suddenly there’s a bonanza.”

On the firm’s personnel turmoil, Dempsey says: “I’ll take total responsibility for taking my eye off the ball and not helping some of the junior guys succeed, which led to people not feeling good about themselves and their role here. I was too busy with other things and am not the world’s greatest administrator. I also let us get to big, and didn’t do a good job making us get smaller in a manageable way.”

The obvious question, of course, is if Dempsey and Phillips will try to raise a successor fund. Strong performance could help them succeed, although they haven’t done new deals for years and some of Bay’s major successes were sourced by long-gone partners. He says that it’s a possibility, and that the pair also has been approached by some LPs about taking over legacy portfolios of other zombie firms. Bay Partners also could merge with another smaller firm.

Dempey explains: “We’re still focused on this portfolio but retirement’s not in the picture for me, period.”

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