Private Equity
Fenwick & West's Silicon Valley venture capital survey finds that up rounds exceeded down rounds last quarter for the first time this year -- 41% of rounds were up, 36% down and 23% flat. Of the companies taking new funding rounds, share prices were up by an average of 11%. The firm looked at 103 high tech and life sciences companies in the Bay Area that raised money last quarter and believes the data shows a ray of hope for venture capital. Here it is:
1 min read · 12 November 2009
Activity on the auction site has spiked in the last 18 months because so many people -- venture capitalists, limited partners, employees of startups and others -- have their money tied up in illiquid assets and want out, said founder Barry Silbert, who spoke yesterday on Grant Thornton's conference call introducing their latest report on the long-term decline of U.S. IPOs. Second Market now has $25 billion worth of assets for sale and 5,000 participants, and Silbert expects the site to complete 2 billion transactions by the end of the year. Some of the biggest names in Silicon Valley -- private companies that are unwilling or unable to go public -- are selling assets, including Facebook, eHarmony, Second Life, LinkedIn and Tesla Motors. There's more interest in Second Market from investors too, Silbert said, partly because secondary sales are the only way some of them can get in on these deals. So Benchmark, Accel, NEA, IVP and several other VCs and investment banks are shopping at Second Market.
2 min read · 11 November 2009
Seattle-based biotech company Omeros went public in October, after raising nearly $110 million in venture capital and delaying its IPO for nearly two years. Since then, it's watched the price of its shares tank. Today they're trading at around $6.44, down over 35% from the IPO price of $10, making Omeros one of the worst performing IPOs of 2009, according to Renaissance Capital. David Weild, the former vice chairman of NASDAQ who co-authored Grant Thornton's reports proclaiming an IPO crisis, told peHUB that Omeros' performance shows how structural flaws in the stock market can undermine the performance of small-cap companies, since Omeros -- whose product speeds recovery from surgery -- is trading "at a discount to total money invested plus new money raised. There's nothing in this business to represent the years of work and human equity that's gone into it." But Omeros has other problems too. Less than a month before its IPO, the company and its directors were sued by its former Chief Financial Officer, Richard Klein, who claims, among other things, defamation and wrongful termination. Klein was fired in January after he acted as a whistleblower and reported that Omeros had falsified claims to the National Institutes of Health on work done for its NIH grant.
2 min read · 10 November 2009
Venture capitalists are sitting on more boards than they were three years ago, according to data released this morning by Dow Jones and the National Venture Capital Association, and more boards than CEOs think they should. VCs think they can handle 4.6 boards for early stage companies and 5.4 boards for later stage companies -- but CEOs think those numbers should be 3.8 and 4.2. CEOs also think VCs should have less control on boards than they do, and the two groups have a different perspective on board conflicts. For VCs the top issue is "executive management searches and changes"; for CEOs it's valuation. (No surprises there). NVCA president Mark Heesen says all these conflicts are going to get worse before they get better, as the venture industry continues to contract. Get the press release here, or see full survey after the jump...
1 min read · 10 November 2009
Jim Goetz of Sequoia Capital -- who joined AdMob's board and led its Series A round in September 2006 -- says the company was not overvalued and there is no Internet bubble. "It's way too early to talk about a bubble." On the contrary, he claims AdMob was worth more than the $750 million Google was willing to pay for it. How much more? He won't say, but after only three years, the company was at $100 million run rate in revenue and still had most of the cash it had raised. "That's one reason why we pushed for stock," Goetz said, "so there's a meaningful upside in AdMob's future." People have forgotten how long it took for an economy to develop for e-commerce, he said, and there's still a long way to go. But the biggest reason Goetz said he invested in AdMob
2 min read · 10 November 2009
The whopping $750 million in stock that Google paid for AdMob today is 16 times the $46.8 million in venture capital that the mobile ad network raised. Gridley -- who heads the investment bank Gridley & Co. -- says that although $750 million may be a drop in the bucket for Google, the high price confirms her theory that bubble-like valuations for Internet companies have returned "with a vengeance." (AdMob investor Jim Goetz of Sequoia disagrees with Gridley, by the way -- see my next post). Over the summer Gridley met with more than 150 companies, mostly digital, to ask about their perspectives on deals, and we asked her what she sees coming.
4 min read · 09 November 2009
Cambridge Associates today released research showing that private equity and venture capital investments improved in Q2, after three straight quarters of shrinkage. On the downside (depending on your perspective), several public market indices performed better. Private returns still look better over the long term, growing, growing faster than all public markets for three years out and older. Also, capital calls to LPs during second quarter exceeded distributions. "New investments have required more equity than those made in recent years due to tight credit markets," said the report, which you can view after the jump...
1 min read · 09 November 2009
Here's a podcast of Zynga CEO Mark Pincus and one of his board members -- Bing Gordon of Kleiner Perkins -- telling a class of business school students at Stanford a couple of weeks ago how to build a great company. The most interesting part of the podcast is not Pincus, who said his vision of the Internet is like cable TV -- "always on, selling people shit...and hopefully it's not all shit" -- but Gordon, a veteran of Electronic Arts, who probably has his hands full right now because Pincus has been under attack all week by TechCrunch's Michael Arrington for allowing Zynga users to be scammed by expensive offers for virtual goods to use in Zynga's games -- a situation Pincus has been trying to correct.
1 min read · 09 November 2009
The number of companies listed on U.S. exchanges has dropped by more than 22% since 1991 and nearly 39% since 1997, even though that was around the beginning of the dot-com boom, Grant Thornton reports in a study that was two years in the making and was first reported by peHUB. U.S. exchanges are losing ground to exchanges in China, London, Italy, Tokyo, Toronto, Australia and Germany, where listings continue to increase. In the U.S., meanwhile, there are not enough new IPOs to replace the number of companies that are being delisted. Grant Thornton estimates a possible loss of 22 million U.S. jobs because of this situation and points to a "wholesale erosion" of the infrastructure that supports IPOs -- sell-side research, brokers, capital commitments by exchanges. U.S. stock markets now favor "computer-driven trading interests at the expense of long-term investors and the U.S. taxpayer," the report said.
1 min read · 06 November 2009
But they may not be going public. Four VCs -- Sharon Wienbar at ScaleVP, Sandy Miller at Institutional Venture, Brian Jacobs at Emergence and Courtney McCrea at Weathergage (a fund of funds) -- appeared earlier this week on a panel at Dow Jones LP Summit and were asked to predict the future. They all see a big pickup in VC-backed exits -- thousands of companies that are five to 10 years old that will be ready to go out by next summer. But they also aired what have become usual complaints about the harms of going public for small-cap companies:
2 min read · 06 November 2009
