Private Equity
Venture capital performance fell across all time horizons in the fourth quarter of 2008, according to data released this morning by the National Venture Capital Association and Thomson Reuters (publisher of peHUB). On the up-side, performance remained positive for all horizons three-years and out, with venture capital continuing to outperform public market indices -- including the Nasdaq and S&P 500 -- for all measured time periods. What's essential to realize, however, is that the most important time horizon is not five years, ten years or 20 years. Instead, it's nine years -- because that correlates to the end of the dotcom boom. We all know that VCs did gangbuster business between 1996 and 1999, but it's in 2000 when things began to go south. So we called up the Thomson Reuters data folks, and found out that the nine-year pooled IRR horizon is just 1.3 percent. For context, the 10-year return stands at 15.5 percent. Come January 1, long-term VC performance data will look very different…
1 min read · 27 April 2009
DFJ Frontier has closed its second fund with $55.4 million in capital commitments. Limited partners include CalPERS, Credit Suisse, Hamilton Lane, LACERS and the Oregon Growth Account. The firm also promoted Frank Foster from venture partner to partner, and opened new offices in Los Angeles and Portland, Oregon.
3 min read · 27 April 2009
Venture capital performance fell across all time horizons in the fourth quarter of 2008, according to data released this morning by Thomson Reuters (publisher of peHUB) and the National Venture Capital Association. Performance is positive for all horizons three-years and out, and has outperformed public market indices -- including Nasdaq and S&P 500 -- for all measured time periods.
3 min read · 27 April 2009
3 min read · 25 April 2009
1 min read · 24 April 2009
2 min read · 23 April 2009
Here's a handful of additional notes on the NY State Common Retirement Fund situation and, in particular, yesterday's decision by Comptroller DiNapoli to ban the future use of placement agents by firms requesting NYSCRF investments (find my initial take here): *** I want to stress that I am in no way attacking the integrity of the current NYSCRF private equity staff, whose morale right now must be lower than that of Montreal Canadiens fans (happy 100 years). In fact, I have to wonder if the lid would have been blown off this scandal earlier, if New York had some sort of whistleblower shield to protect them from ratting out their bosses. Kind of reminds me of the Ohio BWC situation, where good staffers got caught up in something not of their own doing. *** The ban extends beyond placement agents, but a NYSCRF spokesman says that it will not extend to things such as the use of a third-party data room or printing company. I'm supposed to be emailed the official guidelines later today, and will post them. From what I can tell, they are not yet on the NYSCRF website. *** If you are a PE firm that used a placement agent, but are already in the midst of being diligenced by NYSCF, you're okay (seems the ban comes with a grandfather clause). *** DiNapoli has hired outside consultants to review current policies and relationships, but the placement agent ban is not up for discussion.
2 min read · 23 April 2009
If you can no longer use a placement agent to solicit investments from the New York State Common Retirement Fund (NYSCRF), then how do you go about doing it? I can't get an official answer yet, so I went to the pension's website for direction. Follow along: Go to the Treasurer's website: http://www.osc.state.ny.us/ Select "Pension Fund" on the left-hand nav bar, and scroll down to Investments Overview. Select Alternative Investments. The first thing that you'll see, in bold, is a contact name and email address. Only problem is that the name and address are for Nick Smirensky, who stopped working there SEVEN MONTHS AGO! Just to be sure Nick hadn't come back into the fold -- he left last October to become CIO of the New York State Health Foundation -- I shot him an email. It bounced back almost immediately, without any additional contact information for aspiring fund managers. Even worse, I actually brought this mistake to the attention of a NYSCRF spokesman over a month ago (which is why I thought to look again today). Oh competence, thy name is not NYSCRF...
1 min read · 22 April 2009
When a public pension system commits capital to a private equity fund, it typically discloses several pieces of information. Things like commitment size, the fund's basic investment strategy and the fund's senior management. What's missing, however, is any detailed information on how the fund was sourced or diligenced. That's got to change, and quick. I'm not proposing a full proctology exam here, just a basic timeline. For example, who was the first person to approach the pension system about the investment opportunity? And who did that person approach? And so on... If that initial contact is between a "finder" and a member of a pension's board, disclose it. If the initial contact comes at a conference between a GP and a member of the pension's investment staff, disclose it. If the initial contact is between a GP and a pension system's designated consultant, disclose it. And then tell us how the process progressed from there.
2 min read · 21 April 2009
Netscape co-founder Marc Andreessen and former Opsware exec Ben Horowitz are hoping to raise around $250 million for their debut venture capital fund, peHUB has learned. If you just heard a choking sound, it's probably coming from your own throat (or that of your closest LP). What I mean is that $250 million is an extraordinary amount of capital for a first-time, early-stage fund. Andreessen said in February that initial investments would average just $500,000 (a fivefold increase from the $100k that he and Horowitz currently invest out of their own pockets). That would work out to more than 100 portfolio companies, even if you assume that the fund would quadruple-down on every investment (which it won't). Andreesen and Horowitz plan to thin the bloated portfolio size by complimenting their seed deals with a handful of $5 million-ish Series A plays, but I'd think the firm would really need to average $10 million per company to make things manageable.
2 min read · 20 April 2009
