More Reasons For SEC Not To Register VCs?
Here's an unpublished paper from two management professors -- Andrew Metrick at Yale and Ayako Yasuda at UC Davis -- on the economics of private equity. (The paper is due to appear soon in the Review of Financial Studies). The two have analyzed data on 238 funds (94 VC funds, 144 buyout funds) raised over a 13-year period -- between 1993 and 2006 -- and looked at the revenue earned by fund managers. The result? Buyout managers earn a lot more money than VCs. "BO managers build on their prior experience by increasing the size of their funds faster than VCs do," Metrick and Yasuda wrote. "This leads to significantly higher revenue per partner and per professional in later BO funds, despite the fact that these later funds have lower revenue per dollar. Conversely, while prior experience by VC managers does lead to significantly higher revenue per partner in later funds, it does not lead to significantly higher revenue per professional." Buyout managers who can successfully handle $100 million companies can transfer their skills to $1 billion companies and quickly grow their funds, while VCs can't:
