If you were to look at the performance of large funds (those greater than or equal to the vintage year median size) for venture funds between 1983 and 2003, just 2% of the large funds returned more than 2x contributed capital. And 92% of the funds returned less than 1.5x capital. But if you were 24-logo-1to look at the performance of the small funds (those less than the vintage year median size) for those same years, the performance is much better. Indeed, 48% of those funds returned 2x — or, put another way, small funds were 24 times more likely to produce returns above 2x than large funds. And just 36% of small funds returned less than 1.5x capital. Wow.
â€œThe number of companies that miss their first, second, or third quarter out is remarkably high, much higher than we think it should be,â€ says Duncan Niederauer, CEO of NYSE EuroNext.
Angel investors can expect favorable payoffs with only 10 deals, but it takes at least 20 investments to truly be safe.
One of venture capitalâ€™s oldest and most reliable partnersÂ was hard to findÂ in 2009, according to an annual survey that examines where the private equity asset class receives its capital.
Endowments and foundations saw their share of the overall venture capital pool fall to 3.2% in 2009 from 13.1% in 2008
The cutback partly contributed to the venture capital industryâ€™s fund-raising slump last year. Venture firms raised $13 billion in 2009, down 54.6% from the $28.7 billion raised in 2008.
I think it’s pretty clear that there’s been a flight to quality in venture capital
There are two instructively contradictory data points out in venture capital land this morning:
* First-quarter 2010 VC fund-raising was the worst since 1993 (Source)
* Sequoia Capital's new $1-billion fund is oversubscribed by a reported $3-billion (Source)
How can that be?, some might ask. How can one fund be so wildly oversubscribed when the industry is in the worst fund-raising doldrums in modern memory?
A prolific angel investor who deserves the attention– here’s a blog post by Connie Loizos on pehub.Â Here’s a block on what the firm is looking for these days:
The criteria is loose, thoughÂ aÂ priority for Conway right now is the so-called live Internet â€” a wider trend in how users more immediately interact and share content these days â€” and mobile applications. In fact, concepts that combine both in particular â€œmove to the top of the list,â€ says Lee.
TheÂ closer a startup is to an inflection point, the better, too. â€œWe try to get involved when they need help with a key business development deal or a subsequent financing or with key hires,â€ according to Lee, who adds that occasionally, the group â€” operating under moniker SV Angel â€” will also back entrepreneursÂ at the concept stage. HeÂ says that it happens â€œrarely. It very much depends on the entrepreneur and the idea.â€
The rest of the teamâ€™s time is spent cultivating stronger partnerships with Google, Yahoo, and Microsoft on behalf of its startups,Â or meeting, often at Conwayâ€™sÂ lavish San Francisco home,Â with the new entrepreneurs that are regularly funneled their way.
â€œWe try to spend as much time with prospective opportunities because, at the risk of sounding corny, thatâ€™s the most fun part of this business,â€ says Lee. â€œEven if they are opportunities we donâ€™t pursue, [meeting with them] feeds the ecosystem, and we do think itâ€™s a pay-it-forward business.â€
The demand will always go where the money is easier.
“A year ago when we started raising our second fund, which is somewhat bigger, we wanted an institutional base,” Patricof said. “We went out for six months and didn't get a single response. Then we went back to our original investors, sent out a letter again, and four weeks later we raised a lot of money with just a letter and no phone calls. The individual investor market is a great market.”
Unless you haven’t been paying attention, there is definitely a change in sentiment in the tech community:
Going into next year, venture capitalists are feeling more optimistic about the chances of exiting their portfolio companies. Much of this optimism comes from the successful, albeit few, public offerings of venture-backed companies this year.
A very excellent post on how the risks have changed in the online venture game, and how the economics of venture capital have adjusted accordingly.Â The entire post is written generally but ends with a justification for RRE’s investment in hot potato, and some insight into the pricing of that deal.
In my view, the best possible deals from a pricing perspective are deals like the one we just did with Justin Shaffer called Hot Potato. We funded Justin at a seed round price because we believed in Justin and thought that traction would occur. But the price reflected the lack of traction (and even a launched product) at that point.