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Exclusive: August Capital leaving “opportunity” on the table


A growing number of venture capital firms have been raising so-called “opportunities funds,” which are designed to make larger bets either in existing portfolio companies or select growth equity plays. But Fortune has learned that one of the practice’s originators, August Capital, is going in the other direction.

Back in 2000, August took advantage of an opportunity to participate in a $2 billion buyout for hard-drive maker Seagate. The only problem was that its commitment took up around one-third of its fund, which is an exceptionally high percentage. So August later decided to begin raising $250 million side vehicles to handle such deals, and has done so for each of its last three fundraises (no fees are charged on the side-funds until capital is called).

But when August returns to market later this year to raise its sixth fund, there will be no sidecar. Two basic explanations, according to sources familiar with the situation: (1) Having multiple funds can create conflict among LPs. (2) For some of August’s smaller LPs and fund-of-funds, the extra commitment ties up capital that otherwise could be committed elsewhere, even though it might not be used (for example, the most recent sidecar wasn’t tapped).

No word yet on how much August is seeking to raise for its next fund, except that it will be smaller than the last one (i.e., smaller than the last core fund plus overage fund). Plus, it likely will have a higher concentration limit than do most traditional VC funds.

August declined comment, natch.

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