VC firm Bolt stymied by conflict with co-founder

Bolt, a hardware-focused venture capital firm whose portfolio includes Desktop Metal and SpinLaunch, is at risk of losing its charge.

Driving the news: Bolt is locked in bitter litigation with co-founder Ben Einstein, and privately told investors that one of its two remaining general partners, Greg McAdoo, will not participate in future funds.

The big question: Will Bolt invest the remainder of its $80 million third fund, or will it work out a compromise with a minority subset of limited partners who would prefer the investment period to end immediately.

• Bolt believes it has enough dry powder to make around 10 new investments, and sources say there have been informal talks about limiting the number to around half that.
• Bolt's fund documents would require 75% of LP interests to vote in favor of ending the investment period. There's no indication that such a super-majority exists.

The tumult goes back to Bolt's controversial decision in early 2019 to fire Einstein, who was in the midst of caring for his wife who had cancer.

What both sides seem to agree on is that Einstein cut way back on work for much of 2018 and the beginning of 2019, as he became his wife's primary caretaker, and that they all agreed on a reduced work schedule and compensation package going forward. Then things get murky.

• Bolt has told investors that Einstein reneged on the revised compensation package, after it was approved by limited partners, asking for more.
• A source close to Einstein rejects that version, suggesting that Bolt used Einstein's absence to deny him fund economics.
• What no one disputes is that Bolt, led at that point by McAdoo and co-founding partner Axel Bichara, fired Einstein. This meant he and his wife lost health care coverage, as she was dealing with Stage 4 cancer, and were required to sign up for COBRA.
• Bolt and Einstein are in the midst of arbitration, with a hearing scheduled for May 4.

What they're saying: Einstein's attorney sent Axios the following statement...

"Benjamin Einstein was the heart and soul of Bolt. It is sad but not surprising to see Bolt is searching for its compass after ousting the person responsible for creating and leading the fund. We are currently litigating allegations relating to Mr. Einstein's separation from Bolt, including that his former partners acted unlawfully by refusing to pay a penny of the severance."

Bichara didn't return a request for an interview, while Bolt's attorney declined to comment.

McAdoo, who joined Bolt in 2017 after a successful career at Sequoia Capital (he led its original Airbnb investment), emailed the following when asked about his ongoing role:

"I remain a very active General Partner of Bolt and will continue to be involved in all aspects of the firm’s operational and investment activities.  This year and the next will be very busy for everyone at Bolt, including me, and I’m very focused on making new investments, serving on company boards as well as working with our portfolio and everyone at the firm."

The bottom line: At best this reflects the fragility of small partnerships. At worst, it reflects outright heartlessness.

• We hopefully will get clarity following the arbitration process, although any settlement may come with an NDA attached.
• As for Bolt, its future is in flux — even if it manages to fully invest its current fund with McAdoo aboard, any future fund would feature a senior team that investors would have to evaluate anew.