Private Equity
1 min read · 24 November 2008
2 min read · 21 November 2008
Adeo Ressi, founder and proprietor of TheFunded.com, made waves this week, after the PowerPoint slides of a private presentation he gave was leaked to bloggers. peHUB has asked Adeo to expand on the presentation, and to give a fuller understanding of what his slides were intended to present. We thank him for the contribution: "The Canary is Dead" presentation was delivered to a group of Harvard Business School professors to encourage classroom dialogue about better models for venture capital, before students graduate and enter the workforce with bad training. The Model is Broken Investing in growing companies has proven to be economically and socially rewarding to a broader society. However, the venture capital model of delivering preferred equity investments in the $1 to $15 MM range is broken for three specific reasons. First, over 90% of companies that require investment in this range do not receive the capital they need, because they are rejected by the model, discouraged by the process or unaware of the rules. Second, the process of raising the capital has anecdotally proven to destroy shareholder value through enormous time commitments, significant legal fees and deteriorated morale. Lastly, the venture investment model, in its current form, does not generate returns for any of the stakeholders when examined in aggregate or on average. Despite this broken framework, the venture capital model has resisted change. More and more money has flowed into venture capital, and partnerships continue to receive the same management fees and economic rewards. The bursting of the Internet bubble eight years ago was an obvious
4 min read · 14 November 2008
2 min read · 12 November 2008
3 min read · 30 October 2008
4 min read · 21 October 2008
1999 vintage Venture Capital funds are infamous for being some of the worst performing private investment funds of recent memory with the average 1999 Venture Capital fund returning only about $0.95 on the dollar through 6/30/08. The poor returns of these 1999 funds are a result of two main factors: These funds were raised at or near the height of the tech bubble. These funds were often fully invested within 12 months of closing. The result was a ton of money invested very quickly at very high valuations. During the 3 year market correction that followed the tech bubble, venture capital lost favor with many institutional investors. Many of these same investors instead plowed their investment dollars into private equity funds. These funds enjoyed huge returns early
3 min read · 21 October 2008
5 min read · 21 October 2008
4 min read · 21 October 2008
2 min read · 15 October 2008
