Dear Portfolio Company CEO, Hi, my name’s Chris and I fund the folks who fund your company. I’m the money behind the money. I can’t remember if we’ve met, after all, I’ve got several hundred cats just like you in my portfolio. There’s a chance that we talked at your backer’s last annual meeting; maybe […]
10. Grumpy public market investors actually make VCs almost seem cheerful. 9. Liquidity of your vested shares is now just about equal whether you’re public or private. 8. Admit it – that flat price you got on your last round is looking like your best-performing investment of the year. 7. There’s at least a chance that […]
Yes, companies across all industries are scrambling for capital given current market conditions, but none so desperate for inflows as the life sciences/device sector. There has always been a funding gap in the life sciences sector, proverbially known as The Valley of Death. Basic research in the U.S. is particularly well-funded by the NIH and […]
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
Alan Blinder (former vice chairman of the Federal Reserve) is one of my favorite economists. His book, Hard Heads, Soft Hearts, outlines a compelling philosophy in economic policy – whereby a tough-minded, analytical approach is applied to solve difficult social issues. Thus, I read his recent NY Sunday Times article on the central role that […]
The first time I saw a swan we were on a class trip to Central Park (Look, kids! Nature!) White and fluffy and graceful, that swan was nothing like the flying rats we had back in Brooklyn. I remember, too, that our teacher said a pair nested every September over at the 79th Street Boat […]
Earlier this year, I wrote a blog about how to prepare for the financing process, focusing in particular on follow-on financings. Some readers have pointed out to me that I left out a very key element of the due diligence process: What the process itself reveals about the nature of the entrepreneur to the VC. Many entrepreneurs I […]
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
In his speech at the Democratic National Convention in Denver, former President Bill Clinton correctly said that the two most important issues in this election are the future of the U.S. economy and America’s standing in the world. On the future of the U.S. economy, there is a clear contrast between the two candidates. Senator […]
The following was written by Julius Genachowski, founding partner of LaunchBox Digital and special advisor to General Atlantic, and Mark Gorenberg, a partner with Hummer Winblad Venture Partners. This is a defining moment in our history and the most important election of our lifetimes. We face unprecedented economic, energy, environmental, and healthcare challenges. It is […]