Exclusive: Big changes for Ignition Partners

January 25, 2013, 1:32 AM UTC

FORTUNE — Ignition Partners, a Seattle-area venture capital firm formed in 2000 by a group of ex-Microsoft (MSFT) executives, is reorganizing into a much smaller, more focused organization. In other words, lots of people are on their way out.

Fortune has learned that the new Ignition team will consist of just three senior partners: John Connors, the former Microsoft CFO who joined in 2005; Frank Artale, a former biz dev boss at Citrix who joined in 2011; and Nick Sturiale, a veteran venture capitalist who is coming over from Jafco Ventures.

Connors and Sturiale currently serve together on the board of data analysis software maker Splunk (SPLK), which was one of last year’s top VC-backed IPOs. Connors invested in Splunk on behalf of Ignition, while Sturiale did the deal while still with Sevin Rosen Funds (which he left in 2009 for Jafco). Connors and Sturiale also were both involved with Xensource, where Artale worked before the company was acquired by Citrix for $500 million.

The trio will back enterprise software startups with a focus on the cloud, out of a much smaller fund than the $400 million that Ignition raised for its fourth early-stage fund back in 2007 (it also raised a $275 million growth equity fund that same year). Expect a target of $150 million and a $200 million cap. Plans are to hold a first close on around $120 million early next month, with Adams Street Partners as a cornerstone limited partner.

MORE: Splunk proves VC model was not ‘broken’

Other senior team members may remain affiliated with Ignition in part-time capacities, including existing portfolio management. This would include firm co-founders Brad Silverberg, Steve Hooper, John Ludwig, Jonathan Roberts and Cameron Myhrvold (who is expected to be called a venture partner).

I’ve also heard that Silverberg — who led Microsoft Windows in the 1990’s — and some other staffers may try launching a consumer-focused fund, but nothing seems formalized.

The Ignition brand will remain, in part to continue leveraging the organization’s existing back office. Sturiale likely will continue working out of the Bay Area.

“It’s a bold but necessary move  to fit with today’s lean and mean environment,” explains an investor on past Ignition Partners funds. “Today is all about adding value to the entrepreneur, not just dollars to a balance sheet.”

Fortune has reached out to each of the three principals, but none agreed to comment.

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