Benchmark raises $425M fund — but top firm loses partner who made it famous

Benchmark Capital, a venture capital firm that belongs to a handful of elite Silicon Valley venture firms, has raised a fresh $425 million fund to invest in new companies.

But fresh on the news, first reported by PEHub, came the revelation that one of its star investors, Bob Kagle, is apparently stepping down. Kagle was the man who backed eBay, the online auction site that went public in late 1998. eBay was not only a grand slam investment success for Benchmark — the firm owned 22 percent of the company, which went on to become worth billions — but it marked the opening of the great Internet go-go days. It’s also what catapulted Benchmark — at the time a new firm on the block — to top-dog status with more mature firms such as Kleiner Perkins Caufield & Byers, Sequoia Capital and Accel Partners.

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Still, the departure should have little impact on the firm’s standing. Kagle has slowed down significantly, and the firm has been careful to recruit solid younger partners in recent years, including most recently Matt Cohler, who was the early adult supervisor at Facebook, and before him, Peter Fenton, who has scored a string of consistent hits in Wily, JBoss, Friendfeed and others. Cohler has backed Quora, the hot Q&A site that is the hands-down favorite among Silicon Valley’s insiders right now. Fenton, meanwhile, sits on the boards of Yelp and Twitter, two other hot companies where he has led investments.

The firm excelled last year, scoring more than a dozen exits, including the IPO of OpenTable, the sale of Pure Digital to Cisco Systems for $590 million.

Last year, despite the recovery, and the increase in exits elsewhere, Benchmark’s bewildering pace slowed somewhat. But the new fund comes at a good time: There’s plenty of good buzz and optimism as we enter 2011, and the full treasure trove keeps Benchmark solidly in the top handful of venture firms by reputation.

According to the SEC filing, another partner Alex Balkanski is joining Kagle in exiting this latest fund. Balkanski was a video expert and former chief executive of C-Cube Microsystems. While those two partners won’t join Benchmark’s seventh fund, they’re expected to continue to operate by supporting companies backed in previous companies. We’ve requested comment from Benchmark and its public relations firm, and will update if we hear back from them.

Benchmark earlier raised $500 million for its sixth fund in 2008, right before the market cratered.

The other notable trait about Benchmark is its relationship among partners. While other firms have partners who are claim seniority to newer, younger partners and thus enjoy a bigger percentage of the carry — or profit — from the firms’ investments, Benchmark prides itself on the lack of such a hierarchy.