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Return Path cashes out early investors

July 11, 2013: 2:42 PM ET

CaptureReturn Path raises $29 million, but most of it is going out the door.

FORTUNE -- It's been more than 14 years since Return Path helped usher in the original version of Silicon Alley, as a New York-based company that helped reduce the friction between email marketers and their intended recipients. And while Return Path remains a vibrant "big data for email" business, it also has remained private a bit too long for some of its early investors. So the company has decided to cash at least one of them out.

Try this for context: Two original Return Path backers were venture capital firms called Flatiron Partners and Mobius Venture Capital. Not only does neither firm exist anymore, but they've been gone for so long that the deal leads on Return Path -- Fred Wilson for Flatiron and Brad Feld for Mobius -- led the first investment in Zynga (ZNGA) as part of successor firms.

Return Path today disclosed in a regulatory filing that it has raised $29 million in new funding, and a company spokeswoman confirms that most of that money is expected to provide early shareholder liquidity. A source familiar with the situation says that the primary share transfer is between original investor Sutter Hill Ventures and Costanoa Venture Capital, a new firm recently formed by ex-Sutter Hill partner (and Return Path board member) Greg Sands. There also is a small amount of new equity provided by an undisclosed third party.

Neither Flatiron nor Mobius have yet sold any of their positions, but such discussions are said to be ongoing. Fred Wilson's current firm, Union Square Ventures, is a Return Path investor via a follow-on round. Feld's current firm, Foundry Group, is not. Other current Return Path backers include Industry Ventures and SAP Ventures.

Word is that the company is considered a viable IPO candidate with around $70 million in annual revenue, but is holding off because it recently rolled out a pair of large new products (including an anti-phishing solution).

Also worth noting that Scott Weiss, a partner with Andreessen Horowitz, recently left the Return Path board. He had originally joined as an independent director in 2004, and Andreessen Horowitz had never invested in the company (despite some press reports to the contrary).

Weiss explains via email: "Two years ago when I joined A16Z, I told [Return Path CEO Matt Blumberg] that i would have to leave the board once I ramped up my board seats here. With my latest investment, Pindrop Security, I'm now on ten boards at Andreessen Horowitz so it was time. It was actually a sad time to have to resign - I learned a lot about being a board member during my tenure at Return Path."

Brad Feld, Greg Sands and Fred Wilson all remain on the company's board. CEO Blumberg was in Colorado today, and unavailable for comment.

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About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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