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Breaking up is hard to do, but sometimes it's for the best.

There are no angry recriminations after the split of Bank of America Corp. and its former venture arm BA Venture Partners, now known as Scale Venture Partners­ perhaps because it took seven years of polite preparation to achieve.

The transformation of BA Venture Partners into Scale is a lesson in how a firm with a single limited partner can transition smoothly to a broader LP base, ensuring that it can chart its own course.

The former BA Venture Partners, which has been around in one form or another since the 1960s, has been taking steps toward independence for years, wishing not to be beholden to Bank of America for all its capital. That arrangement, while relieving its partners of fund-raising chores, left them vulnerable to shifting winds at their par- ent institution and lessened the firm's dependability in the eyes of entrepreneurs and other VCs.

In 2000, the firm took its first tentative steps on its own by hauling in a multi-year, $500 million commitment from the bank with a 20% carried interest. Previously, the bank made annual allocations to the firm, and distributed profits to partners through a co-investment structure designed to mimic carry.

The new arrangement provided for a "much flatter andwider distribution of carry" throughout the firm, Managing Director Kate Mitchell said.

When it came time to raise a new fund in 2005, the firm and the bank decided to continue that arrangement, even though outside LPs were showing interest. Bank of America was willing to provide all the capital the GPs required, and the partners wanted more time to build their track record. The bank committed $400 million under the same carried interest structure, and the venture firm planned to delay a hunt for external LPs to its next fund.

But it wasn't long before Bank of America changed its mind. It has been paring its private equity portfolio since acquiring FleetBoston Financial Corp. in 2004, and in late 2005 there was a change in leadership in its private equity operation. Subsequently, the bank decided that having independent private equity affiliates such as BA Venture Partners did not fit its strategic goals.

BA Venture Partners had been talking to outside limited partners in the meantime about what a separation from its parent might look like, and was ready to act by utilizing the secondary market.

"The smart LPs were actually helping us figure out what that path might look like," Mitchell said.

In spring 2006, the firm hired Probitas Partners to help vet potential LPs, thinking it could scale back the bank's stake in the 2005 fund to as little as 25%. But with LPs very interested in teams with track records and funds where they can put large slugs of capital to work, in the end Bank of America was able to sell its entire interest. It retains its full stake in the prior fund.

"There are a lot of institutions who want venture capital, primarily U.S. venture capital, in their alternative investments portfolios," said Ted McCaffrey, Bank of America's chief investment officer. "The market was pretty hospitable to this offering."

BA Venture Partners changed its name to Scale Venture Partners and wound up with a dozen LPs including Credit Suisse Group, Key Capital Corp., Lexington Partners, Liberty Mutual Insurance Group, Macquarie Global Private Equity Fund, Montagu Newhall Associates Inc., Pantheon Ventures Ltd., Paul Capital Partners and Storebrand ASA.

The mid-fund LP shift was unusual, said Craig Marmer, a partner with Probitas, as LPs bought stakes in the existing portfolio and agreed to finance commitments to new companies. "I think there'll be other [deals] like it," Marmer said.

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