VC Firm in Hot Seat

Fugazy, Danielle
May 2003
Investment Dealers' Digest;5/19/2003, Vol. 69 Issue 20, p13
Trade Publication
Venture-capital (VC) market players fear that a court case in which two record companies are suing a venture-capital fund for its involvement with controversial music-swapping service Napster Inc. could set a precedent for any aggrieved party to try to reach into the finances of VC firms. Universal Music Group, part of Vivendi Universal and a unit of EMI Group PLC filed suit in April 2003 against Hummer Winblad Venture Partners (HWVP) and two of HWVP's general partners, Hank Barry and John Hummer, HWVP's co-founder. The suit claims that HWVP and the two officials contributed to copyright infringement by giving Napster financial support. Organizations like the National Venture Capital Association (NVCA) believe that the lawsuit, if successful, could have a tremendous effect on VC firms. In a letter to federal legislators, NVCA said it fears that naming investors in such lawsuits might cause venture capitalists to shy away from high-risk technologies.


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