Twitter Backer Fenton Poised for IPO Barrage

Photograph by David Paul Morris/Bloomberg

Peter Fenton, a partner at Benchmark Capital, in San Francisco on May 24, 2012

Peter Fenton is a busy man.

The venture capitalist, best known for his early bet on Twitter, is a board member of at least five more companies that could go public within the next 18 months, including two — Lithium Technologies and Zuora — that each announced $50 million financing rounds this week.

This is new territory for the 41-year-old partner at Benchmark and son of a venture investor. In his decade and a half backing technology startups, first at Accel Partners and then for the last seven years at Benchmark, several companies in Fenton’s portfolio have been been acquired by the likes of Yahoo!, Citrix Systems and CA in the half-a-billion-dollar range. Yet his first initial public offering wasn’t until Yelp’s market debut last year.

With Twitter as the most anticipated U.S. IPO and a handful of his business-software startups gearing up for the process, Fenton took a few minutes this week to reflect on his career. His time is hard to come by. Fenton is also the father of three young kids, with his newest arriving last month.

“When I was 26 years old practicing in the venture business, I hadn’t seen enough patterns of scaling to really identify how we could best help a company,'” said Fenton, who works out of Benchmark’s offices in San Francisco and Menlo Park, California. “Having invested in software for a decade, if for no other reason than you’ve done it for 10,000 hours and 10 years, you start to get good at it.”

Fenton, like his partners at Benchmark, typically gets in startups early. Twitter had about 30 employees when Benchmark invested in 2009. The prior year, Benchmark backed application-monitoring provider New Relic, which founder Lew Cirne had just gotten going. Cirne previously started and sold Wily Technology, another Fenton-backed company, to CA for $375 million.

Zuora was just a three-person founding team when Fenton invested in early 2008. The Web-based billing and finance software developer said today that it raised $50 million in a financing round that included Northgate, a private-equity firm. Tien Tzuo, chief executive officer and co-founder, said Fenton has been central to the company’s strategy and fundraising since day one. In mid-2008, just months after investing, Fenton convinced the company to bring in more capital because of emerging turmoil in the financial markets. Zuora raised $15 million in August, a month before Lehman Brothers collapsed.

“There were signs in the marketplace but no one thought the capital markets would just dry up like that,” Tzuo said. “We raised money and thank God we did, because the liquidity window closed in October.”

For this round, Tzuo said it took one phone call from Fenton to Northgate’s Tommy Vardell to get the firm on board. Earlier this week, Lithium, a provider of social software for companies and brands, raised $50 million in a pre-IPO round.

Just because companies appear headed for an IPO doesn’t mean they’ll get there. And even if they do, late-stage private financings of companies such as Groupon and Zynga have shown minimal gains and some losses as those companies have struggled on the public market.

Still, barring a market collapse, Fenton is poised to generate big returns for Benchmark.

New Relic, which makes software that helps businesses monitor the performance of websites, was valued at $750 million in a funding round in February led by T. Rowe Price Group. Open-source software company Hortonworks, backed by Benchmark in 2011, plans to go public in the next 15 to 24 months, CEO Rob Bearden told Reuters last week. PEHub reported late last year that cloud-software provider Zendesk, funded by Benchmark in 2009, was preparing to go public as soon as late 2013, citing three unidentified sources.

Fenton is a director at New Relic, Hortonworks and Zendesk.

Fenton, a graduate of Stanford Business School, started at Accel in 1999 while he was still a student, but his venture education began much earlier. Fenton’s dad, Noel, co-founded Trinity Ventures in 1986 when Peter was a teenager. Unlike Peter, the elder Fenton got his start as a founder and operator, so he had experience with investors from the other side. A typical dinner table conversation was about how venture capitalists don’t understand the stresses of building a company and that there’s a better way to do things, Fenton said.

“I was a sponge,” he said. “He showed me that being a VC is very different than being a CEO. Empathy goes a long way in helping you help the company.”

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