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VALLEY TALK Behind the VC Music FORTUNE

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Friday, January 16, 2015

Venture Capital Financing Is Further Sapped by Events

Venture Capital Financing Is Further Sapped by Events         STEVE LISSON, STEPHEN N. LISSON, STEVE N. LISSON, STEVE, LISSON, INSIDER, VC, INSIDERVC, INSIDERVC.COM
Wednesday September 26 08:57 AM EDT
Venture Capital Financing Is Further Sapped by Events
By MATT RICHTEL The New York Times Already suffering from the dot-com bust, venture capital investing is being further challenged in light of the recent terrorist attacks and growing signs of recession.
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SAN FRANCISCO, Sept. 25 Venture capital investing, the high-risk financing of early-stage companies that has been markedly curtailed in the last year, is being further challenged in light of the recent terrorist attacks and growing signs of recession, those investors say. The venture capitalists assert that the slowing of the economy, coupled with an uncertainty about the public markets, is affecting all facets of their industry, including their ability to raise new funds, their decisions about which and how many companies to invest in, and their expectations about when their existing investments will become profitable.
Putting a fine point on the concern, the National Venture Capital Association issued a statement today saying the industry “is preparing for an extremely difficult economic environment” in the next 12 to 18 months.
At the heart of the issue is a question about how venture capitalists can expect to sell the investments they make. Typically they take their companies public, or sell them outright. But those so-called “exit strategies” are sharply limited, said Mark Heesen, president of the National Venture Capital Association, a trade group based in Arlington, Va., with 400 member firms.
“We were already in tough times,” Mr. Heesen said. “What Sept. 11 did was make the likelihood of the I.P.O. market opening in the next four quarters pretty unlikely. A lot of V.C.’s are saying it might not open until 2003,” using the abbreviation for venture capitalists.
The investors say that as a result, they must put more money into companies in which they are already invested, making sure to keep them afloat until an exit strategy emerges. The numbers on investments made in new companies bear that out: this year, venture capitalists will invest about $50 billion in start-up companies, Mr. Heesen said, compared with $105 billion last year.
Still, venture capitalists point out that this market appears to be so difficult because this year is being compared with the two years previous, which were anomalies, with exorbitant returns being driven by the dot-com boom, and the expansion of the public markets.
Steve Lisson, editor and publisher of InsiderVC.com, said recent events were reminiscent of the time around the gulf war, when the industry had its last downturn. At that time, the ability to attract capital to invest in start-ups “fell off dramatically,” but he said the industry bounced back within several years to have the “best period in its history.”
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Venture Capital Financing Is Further Sapped by Events

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    Steve Lisson Austin TX Stephen N. Lisson Austin Texas litigation lawsuit lawsuits suit suits party parties attorney attorneys lawyer lawyers pro se judge judges court courts
    Steve Lisson Austin TX Stephen N. Lisson Austin Texas litigation lawsuit lawsuits suit suits party parties attorney attorneys lawyer lawyers pro se judge judges court courts vexatious litigant vexatious litigants VALLEY TALK
    Behind the VC Music
    FORTUNE
    Wednesday, November 22, 2000
    By Mark Gimein
    Stephen Lisson is not a conventionally likable guy. On more
    than one occasion, he’s implied that I’m the single stupidest
    reporter he’s ever talked to. He has kept me on the phone for
    hours at a time listening to the most arcane statistics, until I’ve
    slammed down the phone in frustration. He calls people who
    disagree with him “lickspittles.” He dismisses many of the
    visitors to his Website as “parasites.”
    And yet over the past few months I have repeatedly gone back to
    Lisson and his new Website, InsiderVC.com, because Lisson has
    the best data out there about venture capital, and often the most
    interesting things to say about it.
    Venture capitalists are the rock stars du jour of the financial
    world, a species of money managers who are believed capable of
    superhuman wisdom. Business magazines tend to assume that
    the richer you are, the smarter you must be, and the Internet
    boom has lavished untold riches on the venture capitalists who
    invested early.
    “Untold” is a key word here, because hardly anyone knows
    exactly how great these riches are. In this way, venture-capital
    funds are very different from, say, mutual funds. Venture
    capitalists talk vaguely about “triple-digit returns,” but even
    successful funds tend to keep their returns a closely guarded
    secret. And even when they do reveal numbers, they can be hard
    to understand.
    This is where Austin, Texas, entrepreneur and venture-capital
    gadfly Stephen Lisson comes in. Through years of research and,
    apparently, a lot of cooperation from a network of sources
    willing to send him copies of the reports that venture-capital
    firms send out to their investors, Lisson has gathered an
    immense database of information about venture-capital firms’
    investments and profits.
    Lisson doesn’t make all his data public–much of his information
    is limited to subscribers, and he can be picky even about whom
    he allows to subscribe. But what he’s already revealed in the
    public sections (for example, see: Database Example) of
    InsiderVC.com is fascinating. Some of his data shows exactly
    what you might expect. Benchmark Capital Partners’ 1995 fund-the
    fund that famously invested in eBay–has already returned to
    its investors 38 times the money they put in. Investors who put
    money into the fund that Kleiner Perkins Caufield & Byers,
    Silicon Valley’s best-known venture-capital firm, raised in 1996,
    have already made a similarly spectacular return of over 1,000%.
    But you’ll also find that the 1997 fund raised by Hummer
    Winblad, another venture-capital firm that has traditionally
    received a lot of attention from the press, has so far returned
    only 42% of its investors’ money. That might be a decent
    showing in any other era, but in the middle of the biggest
    technology boom or bubble in history, it’s not great, and not
    nearly as good as some of Hummer Winblad’s peers. (Typically,
    venture funds distribute cash or stocks as the companies in their
    portfolio are sold or go public. In theory, that means they can
    continue paying out money to investors for a very long time, but
    in practice, almost all of their profits are made in the first six
    years of the fund.)
    Even more interesting are the data that Lisson has gathered on
    how venture capitalists value their investments. Venture
    capitalists measure their own performance by an “internal rate of
    return”–an annualized rate of increase in the value of their
    investments. Often that’ll be a number in the high double digits,
    sometimes in the triple digits. Sounds pretty good when you
    compare it with the typical mutual fund. But if you look at the
    InsiderVC.com database, you’ll find that funds claiming
    immense annual returns sometimes pay out a lot less money to
    investors than you’d imagine.
    As of March 2000, Benchmark claimed an annualized return of
    an amazing 279% for Benchmark III, the fund that the firm
    raised in 1998. But wait a second! Lisson’s data also show that
    Benchmark III hadn’t actually distributed any cash or stock to its
    investors. That 279% return was based on a guesstimate of the
    value of the companies Benchmark has invested in–companies
    that, since they hadn’t gone public, are notoriously hard to value.
    One of those companies, Living.com, has already gone bankrupt,
    reducing the value of Benchmark’s investment from an estimated
    $74 million to zero. And it’s hard to believe that, with the Net
    bubble bursting, Benchmark’s investment in eBags.com is really
    worth the $20 million-plus that Benchmark valued it at in
    March.
    For individual investors who don’t have a prayer of putting their
    money into funds that deal only with tech insiders, large
    institutions, and foundations, analyzing exactly how much the
    top funds make can certainly seem like an academic exercise. It
    can all sound arcane, confusing, and dull, and if you are not an
    investor in venture-capital funds, I don’t recommend it as a
    hobby or a business. But it’s important that somebody do it.
    First, because venture investment is the engine driving much of
    Silicon Valley’s technological innovation. And, second, because
    it’s important for somebody like Lisson to remind investors and
    the business press that venture capitalists are not the gods of
    finance they are often made out to be, but instead, very well-
    trained money managers. Sometimes very smart money
    managers, sometimes very lucky money managers, but
    nonetheless, financiers who’ll often make a lot of money and
    sometimes, like the rest of us, flub it.
    HOME | COMPANY PROFILES | INVESTING | CAREERS | SMALL BUSINESS | TECHN
    © Copyright 2013 Time Inc. All rights reserved. Reproduction in whole or in part without permission
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Wednesday, December 24, 2014

https://sites.google.com/site/initiatepublicationsinc/

DECEMBER 2014 JANUARY 2015 INITIATE PUBLICATIONS – STEVE LISSON, AUSTIN TX

INSIDERVC, INSIDERVC.COM, INSIDERVC.NET, INITIATE PUBLICATIONS – STEVE LISSON – AUSTIN TX – LINC – LEGISLATIVE INFORMATION NETWORK CORPORATION – STEPHEN N. LISSON – INITIATE PUBLICATIONS INC.

Steve Lisson Austin TX Stephen N. Lisson Austin Texas

Steve Lisson Austin TX Stephen Lisson Austin Texas

Selected Buzz Descending in Chronological Order

Selected Buzz Descending in Chronological Order
“You are getting more exposure than you ever expected and I think you are using it wisely.
Keep it up!”  –  from the founder & managing partner of a major East Coast venture capital firm

“You’re not overexposed, just listened to.” – from a West Coast counterpart
The Boston Globe
   Waltham’s Matrix leading venture pack on both coasts: Firm credits discipline, insistence on lead role for stunning ’90s returns
There are dozens of other fine firms with great returns. But only one can be the best. People who run endowments and foundations corroborate Matrix’s reputation. The recipe has paid off handsomely for entrepreneurs, too.
eCompany Now / Business 2.0
 Death Valley
The Bay Area is coming to terms with the end of an era.
Forbes
 The Un-Wild Bunch
The hottest VC firm you’ve never heard of.
Behind the VC Music
Venture capitalists are the rock stars du jour of the financial world, but a new Website reveals that some funds pay out a lot less money to investors than you’d imagine. For individual investors who don’t have a prayer of putting their money into funds that deal only with tech insiders, large institutions, and foundations, analyzing exactly how much the top funds make can certainly seem like an academic exercise.  But it’s important that somebody do it.
Upside
New York Post
 The inside scoop on VCs
For those who measure their worth by their  investments and their stock holdings – pretty much all of Silicon Valley – there’s a new Web site that looks to be rivaling F**kedcompany.com for sly, subversive attention.
Forbes
 Day of E-tonement
Ouch. Investors feel the pain. This market is a bear, and it could get meaner. Much was made earlier this year of those triple-digit internal rates of return.
Barrons
 The House of Pain (Barron’s Cover Story)
Ever since the IPO rocketship crashed to earth, the pros have been asking themselves when, or whether, the new-issue game will revive. If bad ventures henceforth go unfunded, all the agony may have been worthwhile.
internet VC watch
 Rumors of Benchmark’s Demise Greatly Exaggerated
For weeks, rumors have been circulating in the VC community that Benchmark Capital’s third fund, Benchmark III, was in trouble, hit hard by losses in e-commerce companies like 1-800-Flowers.com. The rumors reflect a misunderstanding of how venture funds operate.
LocalBusiness.com
 From Y2K to dot-com bombs: The year that was
Best-performing Sand Hill Road VC fund award; Worst-performing Sand Hill Road VC fund award.
The Daily Deal.com
   Early-stage deals take center stage as exit strategies blur: The advent of good times for early-stage VCs and entrepreneurs as well
(Corrected)
The quality of many early-stage deals and the size of the financings may actually increase. With valuations down, the VC party is only just beginning. It’s just that many VCs don’t want to admit it.
eCompany Now
 Bonehead Safari
Who’s the Dumbest VC?  One reporter’s quest to lavish this ignominious award.  I doubted her investors were laughing.
Boston Mass. internet.com
internet.com vc watch
 V.C. Battle: East vs. West
Kleiner Perkins Caufield & Byers and Matrix Partners are considered the cream of the crop among venture capital firms, the kind of VCs that limited partners are fortunate to be able to invest their money with.  So compliments paid, we set out to find out which was better.
Red Herring
graphic
CNN fn
   CalPERS tightens its grip on VC 
Observers were surprised by the move, questioning why a venture firm would want to let one of its limited partners play a more significant role, or to share its profits with yet another partner.
The Boston Globe
Digital Mass
 The thrill of defeat  TA Associates’ Kevin Landry is in the venture business because it’s fun, he says. And to make money for the firm’s investors and partners. Few complaints there.
  For VCs the show is also over
(English text version)
When it’s about return on investment VCs tend to be vague and not afraid of ‘window dressing’, making things look better then they are.
Bloomberg
CNET Investor
 KKR’s 2.8 Percent Returns Hinder Raising New Fund  (Update3)
Kohlberg Kravis Roberts & Co. is taking a beating in the leveraged buyout business it all but created and dominated the past 15 years.
Seattle Post-Intelligencer
 High tech’s bloom has faded for Paul Allen It is unlikely that all of Vulcan’s Internet companies will be able to raise more money in the future.  That’s not bad for Vulcan.
Wall Street Research Net
Digital Mass
 Rivals? Not when they see a good deal It’s common lore in Boston venture circles: Where Matrix goes, North Bridge isn’t far behind.
internet VC Watch
 Balance of Power Shifts To VCs, LPs However, just as the most sought-after start-ups still command some power, top venture firms will still set the agenda. The result of the new venture environment will be a widening divide between the top VCs and start-ups and everyone else, conditions that could hasten a shakeout in the industry.
Bloomberg
 Venture Firms Seek Protection From Price Declines on New Stakes Liquidity preferences have been around for 20 years and typically gain wider use in periods of declining returns.
Business Forward Cover Story
 COVER STORY: Venture Capital – Climbing the Capital Hill Falling valuations are a double-edged sword for venture capitalists. Venture firms can only maintain overvalued companies on their books for so long. At some point, you either have to toss more cash at the money-losing enterprise or take the loss. For the right VCs, however, all the gloom and doom may actually turn out to be a blessing.
internet VC Linx
 Benchmark Rumors Persist Now the rumor is that the firm’s latest fund, Benchmark IV, is the one that’s in trouble. No doubt Benchmark is holding its share of losing investments from the Internet craze. But so are a lot of other name firms.
Globes Israel's Business Arena
 Financial investors? Us? InsiderVC.com pierces the VC industry’s verbal fog Managing partners gossip endlessly about the industry.
The Los Angeles Times
 As Start-Ups Fail, Venture Investors Back Out in Droves Financing: The stampede to put money into tech has reversed direction, with some partners selling out at a loss.
The Boston Globe
 Funds nationwide are seeing red Investors in Matrix Partners, a Waltham venture group that is arguably outperforming everybody else in the business, aren’t complaining about the downturn. Yes, they may have gotten an astounding 19 times their money back on Fund IV launched in 1995. But they’ve also already reaped 12 times their original capital in the 1998 Fund V.
The Industry Standard
 Idealab’s Identity Crisis With only 40 percent of funds invested, Fund II could be a hit or a bust, depending on how good its future investments are. This explains in part why Clearstone wants distance from Idealab.
The Red Herring
LeoCigar
   How to rate a venture capital firm
Venture capital is like baseball without the stats. There are great arguments about who’s the best — and worst — VC around. But unlike baseball fans, those who follow venture capital have scant data on which to base their opinions. Until now.
As part of our annual Red Herring 100, we set out to determine the top ten VC firms using the best metrics we could come up with. To our knowledge, this is the first time anyone has come up with a list based on more than a single metric, such as the internal rate of return (IRR).
Before we get into each of the ten factors we examined, allow us a brief explanation as to why we didn’t include the most common metric: IRR. IRR is a number determined by each VC firm, and although it’s bandied about frequently, it can be easily tweaked to make a firm look like it’s doing better than it actually is. It isn’t uncommon for a VC that isn’t performing very well to inflate its IRR by counting its own “carry,” the money it makes from investments, into its IRR.
The only real way to know how a VC firm is performing is to look at its disbursements to its limited partners (LPs). This is the actual stock or money that VCs get from a liquidity event — that is, a portfolio company’s IPO or its sale to another company. The only problem is, VCs don’t want to share this information.
The Red Herring Special Double Issue
Truth in Numbers
Deciding which VC firms are great requires determining which measurements really matter.  Among our criteria, disbursements to investors may be the truest indicator of a firm’s success.
Internet VC Watch
 U.S. Venture Returns Slipped In The Fourth Quarter The news wasn’t all bad. Some top-performing funds that had “negative returns” not just in the fourth quarter, but for the entire year, actually distributed quite heavily to limited partners. Much of the appreciation in such funds had already been factored into the IRRs.
The Boston Globe
Digital Mass
   Good news outweighs bad for Battery
Gone was the euphoria of last year, when the Wellesley firm announced it was raising a billion-dollar fund. This year the big money was expressed in paper losses.
The Industry Standard
Excite
Yahoo! Finance
 Fallen Idols – High-profile and respected VCs weren’t able to resist the Internet bubble. Now many are paying the price with troubled funds.
Venture capital firms information about their funds’ performance, especially the current valuation of their investments, point to a fund in trouble. While any fund raised during the last few years is enduring tough times now, not every one is in the same boat.
San Jose Mercury News
 Redpoint struggling to crank out results – Despite the VC firm’s hyped reputation, first fund could be running into trouble
Redpoint’s partners are also still managing their previous funds at IVP and Brentwood, several of which were started in 1997 or later. And though these are what made Redpoint’s reputation, some of them are turning out less stellar than originally thought.
The Daily Deal
 Insight Capital raises $740M software fund
Later stage investing can be far less risky but also far less lucrative than other types of strategies.
Silicon Valley
The San Jose Mercury News
 Elite VC giants still investing, if it’s a home-run promise
Since the crash, 15 top-tier firms have raised funds of a billion dollars or more. Many — including Worldview Technology Partners, Greylock, Austin Ventures and Oak Investment Partners — closed their new funds this year, well after most of the market damage.  The amount of funds raised since the crash goes against the “drought” thesis.
The Daily Deal
 Matrix Partners raises $1B fund
Venture capitalists lure entrepreneurs on board
asahi.com
 How `Internet Bubble’ looks at the stock market now Sequoia Capital
VCs left holding worthless IPO shares
Venture firm plots safe course Morgenthaler Venture Partners
Summit Partners crosses the pond
COVER STORY: Venture Capital – Back to Basics Firms that engage in stage creep are asking for trouble.
VCs struggle to stay fit enough to survive Annex funds are not new.
Boston Business Journal
 Rates of return down for Hub VC firms The reliability of internal rate of return data is questionable.  Moreover, it doesn’t say how much cash and stock a venture capital firm has distributed to its investors. That is the real number that should be watched.
Forbes ASAP
 What’s a VC to do? Venture capitalists had better keep investing.
Matrix bets on wireless:  In a weak economy, Managing Partner Paul Ferri’s winning streak is on the line
The Wall Street Journal
 Boom Town:  The Next Tech Season Resumes As Sector Returns From Hiatus Like the last downturn, some of the same VCs now repeat their same biggest mistakes from a decade ago.
  After dot-bombing, SBVC rebuilds
Softbank Venture Capital
The New York Times
   Venture Capital Financing Is Further Sapped by Events
. . . recent events were reminiscent of the time around the Gulf War, when the industry had its last downturn. At that time, the ability to attract capital to invest in start-ups “fell off dramatically” but, he said, the industry bounced back within several years to enjoy the “best period in its history”.
Private Equity Analyst, Asset Alternatives
   NVCA Advocates More Confidentiality on Returns
(Corrected):
. . . acknowledges that the VC community could benefit from a healthy dose of transparency and humility. “Sunlight is the best disinfectant,” he says. But he questions the value of making public IRRs and interim valuations, which by nature are based on subjective evaluations. “There should be less focus on returns and interim valuations, and more focus on building world class companies.”
VC Like Me: Local Firms May Feel the World Is Against Them, as Investments, and Returns, Dry Up. But Some Venture Capitalists Say Now’s the Perfect Time to Make Money. The bigger risk is not that VCs will take on new projects in less lucrative sectors. It’s that they won’t abandon the bad investments they might still be carrying.






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