Private Equity
In Monday's email, I wrote the following: "Smaller VC funds are in vogue right now anyway, as seed-stage investors have become the new rock stars. Traditional VCs have become adult contemporary." The line was in reference to a larger argument about the potential consequences of changing carried interest tax treatment, but has generated a bit of independent discussion. It was used to introduce a panel at Angel Bootcamp earlier this week, was tweeted up by angels and has generated some VC teeth-nashing via email. So it seems to be worth unpacking a bit more:
3 min read · 03 June 2010
Raising a new fund over the past two years has been hard. Raising a first-time fund has been even harder. And raising a first-time fund formed just before the Lehman Brothers meltdown has been harder still. That's the uphill battle faced by Staley Capital, a Boston-area firm formed in August 2008 to focus on the business services space. Staley put its formal fundraising plans on hold, and used a special purpose vehicle to invest an undisclosed amount in Chicago-based marketing agency Aspen Marketing Services.
1 min read · 03 June 2010
1 min read · 03 June 2010
For every private equity firm running low on uncommitted capital, there apparently are dozens that have dry powder pouring out of their pockets. That was the message yesterday from Andrea Auerbach, a managing director with Cambridge Associates, in a presentation at the SuperReturn US conference. She said that Cambridge puts the current private equity overhang at approximately $425 billion, which is 3.5x higher than the overhang at this time in 2000. Moreover, that mammoth figure represents 54% of all capital commitments made between 2004 and 2009. Over 85% of the $425 billion is in funds larger than $1 billion, including 48% in funds larger than $5 billion.
1 min read · 03 June 2010
Greetings from the Investor Summit in Boston (precursor to Super Return), where HBS Professor Josh Lerner is about to give a talk about why venture capital isn't actually broken. Consider it the antidote to Paul Kedrosky. Or to conventional wisdom. I'll live-blog it below, and be sure to chime in with comments or questions (which I'll try to ask during Q&A): Josh Lerner -- VC Ain't Broke
1 min read · 02 June 2010
The NY Times today reports that the SEC is seeking to bar Steve Rattner from the securities biz for up to three years, based on his connection to the New York pay-to-play scandal. It also says Rattner is “fiercely” resisting the suspension, as is his M.O. What’s fascinating (to me) here is that Rattner still hasn’t been charged with anything. Not by the SEC nor by New York AG Andrew Cuomo. Both the SEC and Cuomo previously sued Rattner’s former firm – Quadrangle Group – for actions taken while he was still a partner, effectively alleging that Rattner was the bad actor (Quadrangle has since settled). Isn’t the next logical step a suit against Rattner himself? If not, why not? Cuomo may have given Rattner immunity from criminal prosecution (as reported), but not from civil prosecution. Is Rattner simply tougher to scare than Quadrangle, Carlyle Group, etc?
1 min read · 02 June 2010
peHUB has learned that Zift Solutions, a Raleigh, N.C.-based provider of SaaS that helps corporations create controlled marketing campaigns for channel partners, has raised $500,000 in Series A funding from Southern Capitol Ventures. The round could be topped off at $1.5 million, if Southern Capitol opts to bring on a syndicate partner. The company has already been around nearly three years due to bootstrapping, and has secured customers like HP and Red Hat. "They help clients better communicate its marketing message to its partner programs," explains Jason Caplain of SCV. "For example, the technology allows a company like HP to create different email or website templates that contain some basic, unchangeable marketing materials, but which the channel partners also can customize."
2 min read · 02 June 2010
Yaletown Venture Partners recently closed on more than C$100 million for its second fund, which focuses on early-stage IT and cleantech investment opportunities in the U.S. and Canada. But it no longer has all four of its original partners. Steve Hnatiuk recently left the firm, in order to pursue other opportunities in the Canadian VC market (he says to expect an announcement this fall). No official announcement of his departure, but some eagle-eyed readers noticed the following before and after photos from the Yaletown website:
2 min read · 01 June 2010
Last week I discussed possible consequences of changing the tax treatment of carried interest, in terms of investor behavior. Things like new fund structures, increased exit activity before the tax hike kicks in, etc. Here's one more, particularly for venture capital firms: Smaller fund sizes with larger general partner contributions. How come? The main reason is that ROI on general partner contributions will continued to be taxed as capital gains, as GPs in this case really are acting as LPs. The higher the percentage of GP carry, the lower the percentage of returns taxed as ordinary income. The downside here is that it could be harder for younger partners to earn significant carry (because they don't have as much existing bank), but it could be partially countered by reallocating fee streams.
2 min read · 01 June 2010
2 min read · 28 May 2010
