Toby Mitchenall & Jonathan Brasse

Everywhere one turns these days, limited partners seem to be talking about zombie funds and the risk they pose to their portfolios. Why do the walking dead haunt us so much now?

Founded in 2009, Google Ventures has already become a notable force in early-stage venture investing. With an annual fund allotment of $300 million, the team invests in startups from a variety of sectors. Google recently made investments in music service TuneIn, recommendations site Luvocracy and aircraft technology provider Airware. . Karim Faris, general partner of Google Ventures, leads the firm’s investments in enterprise software, big data and security. . Faris sat down for a video interview with Venture Capital Journal in May 2013, in which he talked more about his investment strategies. . Faris's portfolio companies include ClearStory Data, RetailMeNot and DocuSign. Faris, who used to be on Google’s M&A team, is not focused on finding companies that could be bought someday. Instead, Faris says Google Ventures enters an investment with “the mindset that we’re building a self-sustaining standalone company that has prospects of being a public company one day.” Faris says that strategy increases the odds of providing better returns for the investors and entrepreneurs. . Going forward, Faris says he is enthusiastic about enterprise software, an industry which has seen many successful IPOs as of late. Faris says enterprise software is “making things more accessible more usable and cheaper,” adding that the sector is “ripe for disruption.” . However, regardless of the investment, Faris, like other venture investors, says it ultimately comes down to backing the right team. When deciding whether an investment is worth it, he asks, “Is the problem that they’re solving an aspirin or a vitamin?” You’ll have to watch the video to find out what he means. . By Katie Roof, contributor, Venture Capital Journal . This story first appeared in Venture Capital Journal in June 2013

New Enterprise Associates charges unusually low fees by venture industry standards but takes a higher-than-typical share of carried interest from returns on successful investments, Managing Director Peter Barris told attendees at Thomson Reuters’ PartnerConnect East 2013 conference in Boston in April 2013.   While emerging venture managers often make concessions on fees and carried interest, established players have a history of writing their own rules. Some charge fees above the industry-standard 2 percent. Others seek a share of carried interest greater than the industry norm of 20 percent. A few do both.   For New Enterprise Associates, known for raising some of the largest funds in the venture industry, it’s all about carry. For some time, the firm has made a practice of charging unusually low fees by venture industry standards and taking a higher-than-typical share of carried interest from returns on successful investments, Barris said.   Barris says the practice is meant to align interests of general and limited partners in the fund, with the message to LPs being that GPs won’t make big returns unless they do, too. Additionally, Barris says, NEA makes an effort, where feasible, to pay back fees, which it essentially sees as a loan.   That said, Barris did not recommend dipping below the 2% management fee or upping general partners’ share of carry as advisable for the venture industry at large. For smaller funds in particular, he said, the fee is necessary to cover the operational costs of running the firm. “When you’re an early stage firm, there’s a direct correlation between fees and the cost of operating the fund,” he says. Once you’ve been around longer, however, there’s more of a disconnect.   Overall, Barris says NEA’s long-term strategy has been to take an institutionalized approach to venture investing. While many firms build their reputation around high-profile partners and their compensation strategy around rewarding top performers, NEA pays its general partners the same amount. The idea, Barris says, is to create a culture in which “if I’m a GP, I care about someone else’s deal as much as I care about my own.”   The other notion behind the strategy is to establish NEA as a firm that can outlast the comings and goings of individual partners and operate on a large scale. The thinking there, Barris says, is that NEA’s partners have long believed the venture business is likely to go the way of other industries like banking, in which there are very large, full-service establishments and smaller boutique firms. Venture fundraising data from the last couple of years seems to support that idea, with a concentration of capital in the hands of a few large, established firms.   Another way the firm tries to institutionalize its operations, says Barris, is through its advisory board, which is made up of many of its largest LPs, as well as some independent advisors. The board functions much like one at a venture-backed company, he says. Every fall, for instance, the firm presents its budget to the board, outlining plans for spending on salaries, travel and other expenses.   While Barris didn’t point to any recent major changes in fund terms or firm processes, he did indicate a shift could be in the works if carried interest becomes taxed as income, as the federal government has long been considering. The current tax treatment of carried interest as capital gains, he said, definitely affects how fund terms are structured.   By Joanna Glasner   Note: This story first appeared on peHUB on April 8, 2013

In a world teaming with self promoters, Bijan Sabet comes across as a humble guy. . The Spark Capital general partner could certainly toot his own horn, but he lets his track record speak for itself. He led Spark’s investments in Twitter (valued at a reported $9.9 billion), Tumblr (valued at a reported $800 million), Stack Exchange, RunKeeper, Foursquare, Boxee, OMGPOP (acquired by Zynga last year for $180 million), and thePlatform (bought by Comcast in 2006 for a reported $80 million). . All that and he’s still just 44 years old. . In this video of his keynote at Thomson Reuters’ Venture Alpha East 2013 conference in Boston, Sabet explains why he remains bullish on consumer Internet deals, what he learned from serving on Twitter’s board, why Spark decided to go significantly bigger with its fourth fund, and the attributes that have led to success for young VC firms such as Spark, First Round Capital and Union Square Ventures. . Video date: April 4, 2013

In this keynote talk from Venture Alpha East 2013 in Boston, Shervin Pishevar discusses his plans for Sherpa Ventures. For more details on Sherpa, see peHUB's prior coverage. . Date of video: April 4, 2013.

Mark Yusko, founder and CEO of Morgan Creek Capital Management, shares his perspective on how institutional investors make money during gloomy economic times at Thomson Reuters' PartnerConnect East 2013 conference in Boston in April 2013. . If you invested $10 million in U.S. Treasuries seven years ago, you could expect an annual return of $480,000, but today you see a return of just $24,000 a year, Yusko said. . “In this age of financial repression, we have to think differently about how we invest,” said Yusko, whose speach was entitled “Surving the Age of Financial Repression.” . Yusko founded Morgan Creek in 2004 to provide investment management and advisory services to institutional partners and family offices. Today, the firm has about $8 billion in assets under advisement. It invests across all asset classes and strategies, from traditional equities and fixed income to alternatives, such as hedge funds, private equity, real estate and venture capital. . Prior to founding Morgan Creek, Yusko served as chief investment officer for the University of North Carolina at Chapel Hill from 1998 to 2004. Before UNC, he was senior investment director for the University of Notre Dame Investment Office. . Video date: April 2013

Technology industry icon Steve Case speaks about crowdfunding, entrepreneurship and what should guide the missions of the next generation of startup leaders at Thomson Reuters' Venture Alpha 2012 conference in San Francisco. Case is co-founder of America Online and chairman and CEO of Revolution, a Washington, D.C.-based investment firm he co-founded in 2005. Revolution's investment funds -- including Revolution Growth and Revolution Ventures -- have backed more than 30 companies, including Zipcar, LivingSocial, AddThis, Lolly Wolly Doodle, Bigcommerce and Echo360. . Video date: Oct. 18, 2012

Benchmark Capital General Partner Bill Gurley tells LPs at Thomson Reuters' Venture Alpha 2012 conference in San Francisco that there are a number of brights spots in the VC industry, but he’s worried that they didn’t learn to be wary of funds in excess of $1 billion. His message for institutional investors: Stop blasting money at what have historically been top-tier venture funds, please. It’s bad for the industry. . “You’re not in the stands,” he said. “You’re in the field. And when you allocate [your capital] obsessively to firms in the top quartile, it will have an impact on how things play out.” . Video date: Oct. 18, 2012

Countering years of gloom and doom about the venture industry, Pathway Capital Management Director Cheryl L. Maliwanag offered up a decidedly sunnier outlook on the business at Thomson Reuters' Venture Alpha 2012 conference on Oct. 18, 2012. . “It’s no secret that venture funds have received limited love over the past decade, yet I stand here telling you that we are pretty excited about the opportunity,” Maliwanag told the audience. . Maliwanag heads up due diligence and monitors existing investments in the California office of Pathway, which manages $25 billion in assets through its funds of funds. Her data-intensive presentation was entitled, “Venture Capital: We Weathered the Storm, Here Comes the Sun.” . In particular, Maliwanag addressed the controversial Kauffmann Foundation study. That 51-page report, released in May, analyzed the investments Kauffman made in nearly 100 VC funds over 20 years and concluded that “the limited partner investment model is broken,” because LPs “invest too much capital in underperforming venture capital funds on frequently mis-aligned terms.” The result, at least for Kauffman, is that 62 out of the 100 venture funds it backed “failed to exceed returns available from the public markets, after fees and carry were paid.” . Maliwanag praised Kauffman for releasing the report, but noted that Pathway’s analysis of its own portfolio of venture funds reached different conclusions in some cases. “It really is incumbent on every investor to assess their specific portfolio and their organization’s resources and not accept some of the conclusions of the Kauffman report out of hand or accept blindly anything they read in the headlines,” Maliwang told the audience. . For example, while Kauffman found that its larger funds under-performed its smaller funds, Pathway looked at a portfolio of funds similar to Kauffman’s and “couldn’t find any evidence of that,” she said. “We believe fund performance isn’t related to fund size. It’s really determined by the quality of the manager.” . Pathway, established in 1991, is one of the world’s largest private equity fund of funds managers, with about $25 billion under management. The firm maintains a database of 8,000 funds raised over the past 30 years, which Pathway says gives it “a unique perspective on the asset class.”