President Obama today will propose an overhaul of the financial regulatory system, and the WaPo has obtained an 85-page white paper that lays out the specifics. The net result will be three new federal bureaucracies (four created, one erased). More important to peHUB readers is the following paragraph: All advisers to hedge funds (and other private pools of capital, including private equity funds and venture capital funds) whose assets under management exceed some modest threshold should be required to register with the SEC under the Investment Advisers Act. All advisers should be required to report information on the funds they manage that is sufficient to address whether any fund poses a threat to financial stability. This certainly seems more aimed at hedgies than at PE and VC funds, but Obama also wants to defend against firms skirting the rules by just altering their self-described classification. In other words, a hedge fund can't suddenly call itself a VC fund, in order to avoid regulation. A byproduct is that there are unlikely to be different "modest threshold" of assets under management between the sub-sectors, which probably means most VC funds will actually be left out of the mix (assuming the threshold is in excess of one billion dollars).
2 min read · 17 June 2009
Stratim Capital, a San Francisco-based direct secondaries firm, has acquired an equity stake in Linden Lab, maker of the Second Life virtual world, peHUB has learned. Details are scarce, except that the seller is not one of Linden Lab’s institutional investors. “It is true,” said Stratim managing partner Zach Abrams, when I called him for confirmation. “We bought almost the entire position of an existing shareholder... I don’t think this is a company that anyone will be able to put new money into, because it doesn’t look like it will need to raise another VC round.” Linden Lab has raised around $19 million in VC funding, from firms like Benchmark Capital, Catamount Ventures, Globespan Capital Partners and Omidyar Network.
1 min read · 16 June 2009
Twenty percent of institutional investors plan to decrease their target allocation to private equity over the coming year, according to the latest results of a bi-annual survey conducted by Coller Capital. This is the largest percentage of expectant downsizers since Coller began the survey in 2004, with the group usually representing between just 3% and 6% of respondents. It's worth noting that another 15% or so plan to actually increase their target allocations, although that figure has dropped precipitously over the past two years (it had approached 50% in the summer of 2007). One reason for the decrease is simply that there will be fewer private equity firms in which to invest. LPs expect 28% of today's VC firms and 23% of today's buyout firms will fail to raise a new fund over the next seven years. Those are pretty heady numbers, particularly for a VC industry that already experienced a minor shakeout earlier this decade. Moreover, 84% of LPs report having chosen not to reinvest with an existing GP relationship, compared to just 45% three years ago.
2 min read · 15 June 2009
Bain Capital's Steve Pagliuca has emerged as a potential bidder for The Boston Globe, which is being shopped by The New York Times Co. peHUB has learned that Bain Capital itself is not involved, as Pagliuca is said to view the opportunity more as a civic rescue than as a profit-driven investment. "A lot of folks want to see the Globe saved, because of what it means to the community," says a source familiar with the situation. "But this is not the type of deal that would work within a private equity model... the financial objectives probably would only be to return the paper to cash-flow breakeven." News of Pagliuca's interest was first reported by the Globe's website, which also identified advertising executive Jack Connors and former Globe executive Stephen Taylor as likely suitors (we hear Taylor's interest and ability to actually buy the paper are overstated).
2 min read · 12 June 2009
Next Monday's peHUB Shindig in Chicago is now sold out, with a couple of hundred of you expected to attend. We may be able to open up a few additional tickets over the weekend, so send me an email if you'd like to get on the waiting list. As always, much thanks to our sponsors Bank of Ireland and Crowe Howarth...
1 min read · 12 June 2009
Featuring a much younger Tom Brokaw, Bill Gates and Eric Schmidt:
1 min read · 12 June 2009
Bloomberg reported earlier today that car-sharing service Zipcar is planning an IPO, based on an interview with company CEO Scott Griffith. A few hours later, TheDeal called Bloomberg's story "a gross misinterpretation" and "nonsense," based on a followup interview with Zipcar spokeswoman Nancy Scott Lyon. Specifically, TheDeal quotes Lyon as saying: "We did not announce an IPO and have no immediate plans to go public." But Bloomberg stuck by its story, telling telling Clusterstock that its interview with Griffith was on tape, and that he clearly said "2010" when asked about timing of a possible IPO. TheDeal also is holding firm, reiterating Lyon's quote in some back-and-forth Twitter posting (yes, this is pure new media hell). I've been unable to get Griffith or Lyon on the phone myself -- in part due to ZipCar's dysfunctional voicemail system -- so let me partake in some idle speculation...
2 min read · 11 June 2009
Private equity firm Riverstone Holdings has reached a settlement with the NY Attorney General's office, related to the New York pension fund kickback scandal. Under terms of the agreement, Riverstone will pay $30 million and adopt a "code of conduct" related to its future fund-raising activities. This is similar to a recent settlement reached between New York and The Carlyle Group, which agreed to pay $20 million and adopt the same rules. One big difference, however, is that Carlyle Group also received assurances that none of its executives would be prosecuted for their dealings with the New York State Common Fund. Riverstone has not received a similar promise for firm co-founder and senior managing director David Leuschen, who remains under investigation.
8 min read · 11 June 2009
The California Public Employees' Retirement System (CalPERS) yesterday made headlines for proposing an increase to its private equity allocation from 10% to 14 percent. A vote is scheduled for the pension fund’s board meeting next week. At first glance, the move seems to be a giant vote of confidence in private equity (venture, buyouts, etc.). But that gets tempered when one realizes that CalPERS is already at 13% exposure to the asset class, which makes the proposal look more like reactionary CYA prompted by the denominator effect. So which is it? According to sources close to the pension fund, it’s both. The allocation increase’s immediate affect would be to address the current exposure realities, but there also is a desire to “juice returns during the upcoming recovery.”
1 min read · 10 June 2009
Connie last night posted a Q&A with economist/pundit Paul Kedrosky, who has released a paper arguing that the VC industry must shrink in line with the decreasing capital requirements of the startups they fund. Much of the blame for the buildup, Paul says, goes to limited partners – who have agitated for access to top-tier firms (or at least ones that used to be top-tier), and who jumped at the opportunity to invest when the firms' fund-sizes grew. Paul is certainly correct in his historical assessment – just look at Kleiner’s rapid growth – but I’m not so sure that LPs are going to help the VC industry rightsize/downsize. After all, for every new LP dollar committed to VC funds over the past few years, there have been a dozen LP dollars committed to buyout funds.
1 min read · 10 June 2009
