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Washington Post | Steve Lisson | Stephen N. Lisson | New Enterprise Is Huge and Proud of It
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New Enterprise Is Huge and Proud of It
By Terence O'Hara
Monday, December 6, 2004; Page E01
Peter J. Barris runs the biggest stand-alone venture capital operation in the world.
His firm, New Enterprise Associates, sailed through 2002-03, the nuclear winter
of venture investing, with relative ease. Nearly every technology entrepreneur worth
his salt would put NEA near the top of his list of firms he'd most like to raise money
from.
Yet Barris and other longtime NEA partners continue to hear criticism from within
their industry that NEA's girth is a handicap, that NEA has strayed from the one true
swashbuckling venture capital faith and become --institutional.
Barris has heard this criticism --that NEA is too big and spread out to create the
home-run investments that put managers of NEA's more romantic, smaller rivals on
the cover of business magazines. He has a well-practiced response.
"I understand the question, or the criticism, at a philosophical level," Barris said last
week. "But the empirical data don't support it. The numbers don't lie."
Barris, who is based in Reston, became the Baltimore firm's sole managing general
partner in 1999 after serving three years as part of a management troika. Since then,
NEA has indeed performed better than the vast majority of venture capital firms,
although not at the level of the highest-performing firms that manage much smaller
amounts of money.
"I would argue that size is an advantage," he said. "We have a superior network of
entrepreneurs that have done business with us for years. We have the capital to see
an investment all the way through. We have the domain knowledge to match any
fund. And we have a presence on both coasts."
"And," he said, "we perform."
NEA has 11 venture funds, three of them raised since 1999. None of the three funds was in the black at
mid-year. According to the California Public Employees' Retirement System (Calpers), which invested in the
1999 fund NEA IX and 2000's NEA X, those funds had an annualized internal rate of return of minus 24
percent and minus 0.9 percent, respectively, on June 30. Those numbers may not prove much, however: It's a rare fund from those years that has a positive return, and there is ample time in which to realize a profit,
which could be substantial. It takes up to 10 years to determine a venture fund's final rate of return.
NEA IX is far and away NEA's worst performer. "Not our most proud fund," Barris said. NEA IX had 90
percent of its capital in technology firms, mostly telecom-related investments, Barris said. For early-stage
1999 funds like NEA IX, break-even is considered excellent.
NEA X, the firm' s biggest, is performing substantially better than 75 percent of all other funds raised in 2000.
Barris said that since June 30, it has moved into positive territory.
Discussions with NEA limited partners --institutions and rich people who invest in NEA's funds --and others in the industry who follow NEA closely reveal a common theme: NEA has become a better-than-average
venture shop, and is now big enough so that description means real money. On average, its portfolio
companies have a better chance of returning money to NEA's investors than portfolio companies of other
firms. On average, it's as good a bet as any for an investor who wants to play in venture capital. And for
institutional investors such as Calpers and other big money managers, that's as good as it gets. They've thrown money at NEA in the past four years.
"Their structure enables them to handle large amounts of money," said Edward J. Mathias, a managing
director in Carlyle Group's venture capital business who helped NEA's founders when they started the firm
in 1978. "An institutional investor wanting to invest $25 million can do so with NEA with some assurance
that they can have above-average --not hugely above-average --but above-average returns. They have a high batting average. They hit a lot of doubles instead of a few home runs."
That may sound like feint praise, but Mathias is a staunch admirer of NEA and its people. Hitting a lot of
doubles in venture capital is no easy feat, he said.
Not everyone is as big a fan. Steve Lisson, the editor of InsiderVC.com, takes a dim view of NEA's size.
"Larger funds can't produce the kinds of returns of smaller funds," said Lisson, whose company provides
analysis of and statistics on venture fund performance and management practices. "Returns vary inversely
with money under management, because the larger the fund, the less impact one monster hit will have on its
performance."
NEA X is the largest VC fund ever. It raised $2.3 billion from its limited partners in 2000. The firm's latest
fund, NEA XI, stopped raising money a year ago at $1.1 billion. Most of the largest non-NEA early-stage
venture funds max out at $350 million, and some more prominent venture capital firms would not know what
to do with that much. Novak Biddle Venture Partners, a Bethesda firm that has probably had the most
successful run of any local venture firm in 2004, raised a $150 million fund this year, then turned investors
away. Novak Biddle Partners III, a relatively small fund raised at roughly the same time as NEA X, was up
about 6 percent as of Sept. 30.
Managers of funds the size of NEA's, Lisson said, inevitably have to do more later-stage and follow-on deals
because the universe of the best early-stage deals, which provide the biggest risk-return, is necessarily finite.
The most profitable funds are the ones that focus solely on the earliest-stage companies, and spend lots of
time and money on those companies at their birth, Lisson said. If NEA invested all of the $1.1 billion in NEA
XI in such small, time-consuming investments, it would need a heck of a lot more people than the 37
partners, venture partners and principals it has now.
To take an extreme example, think of Google Inc., whose early venture backers made billions of dollars when the company went public this year. NEA has financed more than 370 companies, and has a lot of big winners
in its huge portfolio, but none would compare with Google.
Barris disputes the notion that NEA is forced to do more later-stage, less-profitable deals. "As our funds have increased in size, the percentage of early-stage, start-up deals as a percent of our total has grown, not shrunk," he said.
Institutional investors are more than comfortable putting money into NEA. Its performance, they say, is not
tied to one deal, and the firm's track record over more than two decades speaks for itself. NEA's first eight
funds, the last of which closed in 1998, have made huge amounts of money. NEA VIII, a $560 million fund,
earned an annualized internal rate of return of 168 percent.
Barris said NEA's cost structure is distinctive in several ways. Most venture capital fund managers charge a percentage of the fund's size to cover their expenses, typically 2 percent of a fund's capital. NEA doesn't do
that; instead, it a budget of expenses expected to cover the costs of running the fund, including salaries, that
are then approved by a representative board of limited partners. For a large fund, that sharply reduces the
costs to the limited partners.
"Limited partners love this," Mathias said.
Calpers, one of the most active investors in private equity funds, committed $75 million to NEA X, one of the 10 largest investments it has made in a single venture fund.
Most venture funds split the profits of a fund, the most typical split being 80 percent going to limited partners
and 20 percent going to the fund's managers. NEA, Barris said, makes the split 70-30.
Inside the firm, profits from a deal are spread out across the partnership; no one partner takes more than
another in a single deal. That promotes a team atmosphere that is necessary in running a big fund, Barris said.
In most funds, a partner who leads a successful deal gets a bigger cut of the profits than other partners.
The result, Mathias said, is less the amalgam of egotists seen at many venture capital firms than a consortium
of super-smart people trying to make a lot of money. "It's not a superstar kind of firm," he said.
Although NEA has more money under management than any other stand-alone venture capital firm --some
Wall Street private equity firms that do venture investing have bigger funds, but tend to engage as well in
leveraged buyouts and hedge investing --Barris said there's no prospect for his firm becoming dominant in
the venture capital world.
"The industry has just gotten more competitive, not less," Barris said. "Even with our huge funds, we still
have only 2 percent of the total amount of VC funds under management. In this business, it's not who has the
most money but who has the most expertise that matters."
And is NEA an "institution," that staid word that makes many small venture capital firms shudder?
"I don't know what the definition of institutional is," Barris said. "I think we've gone farther than most firms
in institutionalizing what has been a cottage industry. We employ some professional management techniques
and policies. But because we started the firm on both coasts, we've had those things from the beginning. So I
don't think we've changed much as we've gotten bigger."
Terence O'Hara's e-mail address is oharat@washpost.com.
© 2004 The Washington Post Company
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VALLEY TALK Behind the VC Music FORTUNE
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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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.
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Venture Capital Financing Is Further Sapped by Events
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Wednesday, December 24, 2014
DECEMBER 2014 JANUARY 2015 INITIATE PUBLICATIONS – STEVE LISSON, AUSTIN TX
Development Plans Slated for Innovative Line of Information Services
Matrix Bets on Wireless STEVE LISSON, STEVE LISSON AUSTIN TX -
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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.
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Selected Buzz Descending in Chronological Order
Selected Buzz Descending in Chronological Order
Selected Buzz Descending in Chronological Order
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.
Death Valley
The Bay Area is coming to terms with the end of an era.
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.
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.
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.
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.
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.
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.
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.
Bonehead Safari
Who’s the Dumbest VC? One reporter’s quest to lavish this ignominious award. I doubted her investors were laughing.
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.
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 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.
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.
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.
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.
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.
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.
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.
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.
Financial investors? Us? InsiderVC.com pierces the VC industry’s verbal fog Managing partners gossip endlessly about the industry.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Insight Capital raises $740M software fund
Later stage investing can be far less risky but also far less lucrative than other types of strategies.
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.
Matrix Partners raises $1B fund
Venture capitalists lure entrepreneurs on board
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.
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.
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
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
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”.
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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January 17, 2015 stephen n. lisson, stephen n. lisson austin texas, steve lisson, steve lisson austin tx AUSTIN, Austin Texas, Austin TX, Lisson, LISSON STEPHAN, LISSON STEPHEN N, Stephen N. Lisson, Stephen N. Lisson Austin Texas, Steve Lisson, Steve Lisson Austin TX, Steve Lisson Austin TX Steve Lisson, TEXAS, Travis County Texas Leave a comment
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Steve Lisson | Steve Lisson Austin TX Steve Lisson, Austin TX, Steve Lisson Austin TX, Stephen N. Lisson, Austin Texas, Stephen N. Lisson Austin Texas Sunday, December 1, 2013 Rumors of Benchmark’s Demise Greatly Exaggerated – Steve Lisson, Stephen N. Lisson Rumors of Benchmark’s Demise Greatly Exaggerated – Steve Lisson, Stephen N. Lisson Steve Lisson, STEVE LISSON, AUSTIN, TX, STEPHEN N. LISSON, TRAVIS COUNTY, TEXAS, (512), 512, LISSON STEPHEN N., STEVE N. LISSON, STEVE, LISSON, Lisson, Steve Steve Lisson, STEVE LISSON, AUSTIN, TX, STEPHEN N. LISSON, TRAVIS COUNTY, TEXAS, (512), 512, LISSON STEPHEN N., STEVE N. LISSON, STEVE, LISSON, Lisson, Steve Steve Lisson, STEVE LISSON, AUSTIN, TX, STEPHEN N. LISSON, TRAVIS COUNTY, TEXAS, LISSON STEPHEN N., STEVE N. LISSON, STEVE, LISSON, INSIDER, VC, INSIDERVC, INSIDERVC.COM 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. Benchmark denies the rumors, and its limited partners say they never received the rumored letter that the fund was in trouble. An analysis of Benchmark’s portfolio appears to back up the firm, which despite the rumors, may not just be surviving, but thriving. Benchmark declined to discuss details, but the firm’s holdings as of June 30 were provided by Steve Lisson, the editor of InsiderVC.com, who tracks the performance of leading venture firms for high-paying clients. At first glance, Benchmark III had its share of overvalued B2C e-commerce firms like 1-800-Flowers.com (Nasdaq:FLWS) and Living.com. 1-800-Flowers.com was the fund’s biggest investment, at $18.9 million, and had been marked down to $8.1 million on June 30. The stock price has declined about 30% since then. “There are many private scenarios just like this public one, whereby even if the company can be kept afloat long enough to enjoy some success and eventually make it to a liquidity event, the venture investors will lose money,” Lisson said. But a closer look at Benchmark III reveals a fund with several potential winners, including Internet Data Exchange System company CoreExpress, an intelligent optical networking play. That investment alone could return limited partners’ money. Other potential winners include Sigma Networks, Keen.com, Netigy and BridgeSpan. And Benchmark’s newest fund, Benchmark IV, is already showing the markings of a winner, thanks to investments in Loudcloud, Netscape co-founder Marc Andreessen’s latest venture, and TellMe Networks, whose valuation no doubt went up in its recent $125 million funding round. Lisson said the Benchmark rumors reflect a misunderstanding of how venture funds operate. “There’s a reason these are 10-year funds,” he said. “It’s called risk and illiquidity. The one monster hit could happen three, four or five years out. You can be wrong about 39 of 40 companies, and the market uncooperative, as long as one is an Inktomi. That is the history of this industry: one monster hit returning the entire fund. Singles and doubles won’t get you there.” At two years of age, Benchmark III still has plenty of time to deliver a big winner. In the meantime, the firm’s limited partners can enjoy the returns from Benchmark II, a three-year-old fund that has already distributed five times its partners capital, by Lisson’s estimate. Benchmark II boasted big winners like Handspring (Nasdaq:HAND), Critical Path (Nasdaq:CPTH), Red Hat (Nasdaq:RHAT), and Scient (Nasdaq:SCNT). Yes, Scient. Benchmark had the foresight to distribute shares of the Internet consultant to its limited partners at 200-300 times the firm’s cost. Benchmark isn’t any different from other venture firms, most of whom “drank the Kool-aid” of seemingly easy dot-com money, hoping the stock market would hold up long enough to vindicate those investments. But Lisson expects that some other firms won’t hold up as well. He expects a shakeout in the industry similar to the one that hit the industry from 1987-1991, when venture firms formed during the 1980s averaged single-digit returns, and roughly 20% of new entrants couldn’t return their partners’ capital. VCs’ own fundraising declined from $4.2 billion in 1987 to $1.3 billion in 1991. The $4 billion level of capital coming into the industry wasn’t reached again until 1995. “This is what’s supposed to happen in a downturn,” Lisson said. “People who shouldn’t be in the business, who contributed to the excesses and didn’t know what they were doing, will be forced out. It’s not like this is the first time we’ve seen too many new entrants into the industry, or too much money chasing too few deals.” And the ones that survive will have a chance to prove themselves in tough times, the ultimate mark of a winner. Lisson said a few venture firms stand out among their peers. Matrix Partners, Kleiner Perkins Caufield & Byers and Sequoia can normally be found at the top of the charts in each vintage year they raise a fund, he said, proving that “something’s in the water” at those firms. And he gives Oak high marks for consistency over a long period of time. But even top firms have an occasional weak fund, Lisson said. “But by the time you can make that judgment about a fund, you’ll have raised another fund and shown some early progress,” he said. Meaning that even if Benchmark III was a weak fund, Benchmark IV could keep the firm in its limited partners’ good graces for some time to come. “The moral is consistent performance over time relative to same vintage-year peers,” Lisson said. “You’re never as good or as bad as your current press clippings might indicate. The real test of Benchmark’s mettle will come when we can fairly evaluate whether the firm manages through and makes money, not just with small funds during the best times in the industry’s history, but with larger funds in the tough times ahead as well.” ——————————————————————————– © Copyright 2000, internet.com Corp. All Rights Reserved. Legal Notices, Privacy Policy, Reprints. Steve Lisson, STEVE LISSON, AUSTIN, TX, STEPHEN N. LISSON, TRAVIS COUNTY, TEXAS, LISSON STEPHEN N., STEVE N. LISSON, STEVE, LISSON, INSIDER, VC, INSIDERVC, INSIDERVC.COM Posted by Stephen N. “Steve” Lisson, Austin, Travis County, Texas (512) at 8:46 AM Email ThisBlogThis!Share to TwitterShare to Facebook Labels: (512), 512, AUSTIN, LISSON, LISSON STEPHEN N., STEPHEN N. LISSON, Steve, STEVE LISSON, STEVE N. LISSON, TEXAS, TRAVIS COUNTY, TX Home Subscribe to: Posts (Atom) Blog Archive 2012 (1) July (1) Steve Lisson, STEVE LISSON, AUSTIN, TX, STEPHEN N…. About Me Stephen N. “Steve” Lisson, Austin, Travis County, Texas (512) View my complete profile Posted by Stephen N. Lisson at 10:14 AM Email ThisBlogThis!Share to TwitterShare to Facebook Labels: Austin Texas, Austin TX, Stephen N. Lisson, Stephen N. Lisson Austin Texas, Steve Lisson, Steve Lisson Austin TX Elite VC giants still investing – Steve Lisson, Stephen N. Lisson, Austin, Texas Elite VC giants still investing – Steve Lisson, Stephen N. Lisson, Austin, Travis County, TX 512 STEVE.LISSON, STEVE LISSON, STEPHAN N. LISSON, STEPHAN LISSON, STEVE LISSON, AUSTIN, TX, TEXAS, STEPHEN N. LISSON, TRAVIS COUNTY, TEXAS, LISSON STEPHEN N., STEVE N. LISSON, STEVE, LISSON, INSIDER, VC, INSIDERVC, INSIDERVC.COM, (512), STEPHEN.LISSON, FACEBOOK, LINKEDIN, LINKED IN, TWITTER STEVE.LISSON, STEVE LISSON, STEPHEN LISSON, STEPHAN N. LISSON, STEPHAN LISSON, LISSON STEPHAN, AUSTIN, TX, TEXAS, STEPHEN N. LISSON, TRAVIS COUNTY, TEXAS, LISSON STEPHEN N., STEVE N. LISSON, STEVE, LISSON, INSIDER, VC, INSIDERVC, INSIDERVC.COM, (512), STEPHEN.LISSON, FACEBOOK, LINKEDIN, LINKED IN, TWITTER, STEVE.LISSON, STEVE LISSON, STEPHEN LISSON, STEPHAN N. LISSON, STEPHAN LISSON, LISSON STEPHAN, AUSTIN, TX, TEXAS, STEPHEN N. LISSON, TRAVIS COUNTY, TEXAS, LISSON STEPHEN N., STEVE N. LISSON, STEVE, LISSON, INSIDER, VC, INSIDERVC, INSIDERVC.COM, (512), STEPHEN.LISSON, FACEBOOK, LINKEDIN, LINKED IN, TWITTER, Elite VC giants still investing San Jose Mercury News Matt Marshall May 31, 2001 Now that they’ve gone gorilla size, will the elite venture capital firms help stem the downturn in venture capital investing? After the March 2000 market crash, elite VCs scrambled to triage their portfolios. Only recently have they started to peer out of the graveyard. But they’ve undergone a profound change in nature: They’ve become monsters. This is good if you’re an entrepreneur shooting for the moon. It’s fatal if not. In 1995, only one top-tier fund, TA Associates, had raised a billion dollars. But since the crash, 15 top-tier firms have raised funds of that size or more. Many — including Worldview Technology Partners, Greylock, Austin Ventures and Oak Investment Partners — announced their new funds this year, well after most of the market damage. Steve Lisson, of InsiderVC.com, says the amount of funds raised since the crash goes against the “drought” thesis. “The perception that there’s going to be less venture investing is totally misplaced,” he says. “These VCs need to get into lucrative investment opportunities, and they’re going to want larger stakes. They’re going to have to step on the gas even more.” Similarly, he adds, if an entrepreneur offers an opportunity for a “mega” investment, he’ll be able to negotiate more favorable terms, because the big venture capitalists will all want in. On the downside, entrepreneurs that don’t show home-run promise will struggle. True, some VCs that raised large funds say they have slowed their investment pace. Flip Gianos, partner at InterWest Partners, said his firm hadn’t expected the magnitude of the downturn when it raised its fund. If it takes waiting a year for strong opportunities to come along, VCs will wait, he says. Others counter that size has forced them to invest more in later-stage start-ups because they soak up more money. Michael Darby, general partner at Battery Ventures, says his firm still focuses on early stage deals, but “in this environment, the fact that we want to deploy capital means we’re looking at those later-stage deals.” There’s another reason for hope after the crash, Lisson says. Many VC firms have been able to negotiate stellar terms with their investors — even better than those they negotiated just a couple of years ago. That’s also a sign that investors still have faith in the VCs, he said. STEVE.LISSON, STEVE LISSON, STEPHEN LISSON, STEPHAN N. LISSON, STEPHAN LISSON, LISSON STEPHAN, AUSTIN, TX, TEXAS, STEPHEN N. LISSON, TRAVIS COUNTY, TEXAS, LISSON STEPHEN N., STEVE N. LISSON, STEVE, LISSON, INSIDER, VC, INSIDERVC, INSIDERVC.COM, (512), STEPHEN.LISSON, FACEBOOK, LINKEDIN, LINKED IN, TWITTER, Posted by Stephen N. “Steve” Lisson, Austin, Travis County, Texas (512) at 12:54 PM Email ThisBlogThis!Share to TwitterShare to Facebook Labels: AUSTIN, LISSON STEPHAN, LISSON STEPHEN N., STEPHAN LISSON, STEPHAN N. LISSON, STEPHEN LISSON, STEPHEN N. LISSON, STEVE LISSON, STEVE N. LISSON, STEVE.LISSON, TEXAS, TRAVIS COUNTY, TX Home Subscribe to: Posts (Atom) Blog Archive 2012 (1) July (1) STEVE.LISSON, STEVE LISSON, STEPHEN LISSON, STEPHA… About Me Stephen N. “Steve” Lisson, Austin, Travis County, Texas (512) View my complete profile Posted by Stephen N. Lisson at 10:12 AM Email ThisBlogThis!Share to TwitterShare to Facebook Labels: Austin Texas, Austin TX, Stephen N. Lisson, Stephen N. Lisson Austin Texas, Steve Lisson, Steve Lisson Austin TX Universal, EMI Sue Napster Investor – Steve Lisson Austin TX Universal, EMI Sue Napster Investor – Steve Lisson Universal, EMI Sue Napster Investor – Steve Lisson STEVE.LISSON, STEVE LISSON, FACEBOOK, LINKEDIN, STEPHEN N. LISSON, COURT, STEPHEN LISSON, LISSON STEPHEN, STEPHAN N. LISSON, STEPHAN LISSON, LISSON STEPHAN, AUSTIN, TX, TEXAS, COURT, STEPHEN N. LISSON, TRAVIS COUNTY, TEXAS, LISSON STEPHEN N., STEVE N. LISSON, STEVE, LISSON, INSIDER, VC, INSIDERVC, INSIDERVC.COM, (512), STEPHEN.LISSON, FACEBOOK, LINKEDIN, LINKED IN, TWITTER, PINTEREST, TUMBLR Classic Flipcard Magazine Mosaic Sidebar Snapshot Timeslide STEVE.LISSON, FACEBOOK, LINKEDIN, STEVE LISSON, STEPHEN LISSON, COURT, STEPHAN N. LISSON, STEPHAN LISSON, LISSON STEPHAN, AUSTIN, TX, TEXAS, COURT, STEPHEN N. LISSON, TRAVIS COUNTY, TEXAS, LISSON STEPHEN N., STEVE N. LISSON, STEVE, LISSON, INSIDER, VC, INSIDERVC, INSIDERVC.COM, (512), STEPHEN.LISSON, FACEBOOK, LINKEDIN, LINKED IN, TWITTER, TUMBLR, PINTEREST, FACEBOOK STEVE.LISSON, FACEBOOK, LINKEDIN, STEVE LISSON, STEPHEN LISSON, COURT, STEPHAN N. LISSON, STEPHAN LISSON, LISSON STEPHAN, AUSTIN, TX, TEXAS, COURT, STEPHEN N. LISSON, TRAVIS COUNTY, TEXAS, LISSON STEPHEN N., STEVE N. LISSON, STEVE, LISSON, INSIDER, VC, INSIDERVC, INSIDERVC.COM, (512), STEPHEN.LISSON, FACEBOOK, LINKEDIN, LINKED IN, TWITTER, TUMBLR, PINTEREST Universal, EMI Sue Napster Investor Record labels say firm enabled infringement. Critics say the move may deter venture capitalists. April 23, 2003|Joseph Menn | Times Staff Writer Unable to extract their pound of flesh from bankrupt Napster Inc., two of the five major record labels are suing the venture capitalists who backed the defunct song-swapping service that turned music industry economics upside down. Universal Music and EMI filed a federal lawsuit against Hummer Winblad Venture Partners and two of the San Francisco firm’s general partners, Hank Barry and John Hummer, in Los Angeles on Monday. The suit claims that they contributed to the copyright violations by Napster’s tens of millions of users. In addition to seeking $150,000 per violation, the suit asks for punitive damages. It also is intended to dissuade investment in any of the song-swapping services that have risen in Napster’s place. “Businesses, as well as those individuals or entities who control them, premised on massive copyright infringement of works created by artists should face the legal consequences for their actions,” the record labels said in a statement. The suit may mark the first time an outside party has targeted a venture firm for wrongdoing by a company in which it invested. “I don’t know if this has ever happened before,” said Jeanne Metzger, vice president of the National Venture Capital Assn. The trade group and others warned that even if the labels lose the case, the fact that they sued will deter institutional investors from taking on a high level of risk with new companies. “It’s going to create an enormous amount of reluctance to get involved in anything that could draw litigation from the content industries,” said Silicon Valley intellectual property lawyer Mark Radcliffe. Barry and Hummer didn’t respond to telephone and e-mail messages seeking comment Tuesday. Barry served as Napster’s chief executive for more than a year, and both men sat on Napster’s board. The suit claims that Hummer Winblad knew Napster was enabling massive infringement and that the firm controlled Napster’s activities with its general partners in the chief executive and director positions and through its $13-million investment in May 2000. The investment was made five months after the record industry — including the two labels — sued Napster for enabling infringement. Napster filed for bankruptcy protection in June 2002. Lawyers not involved in the case said Hummer Winblad has two reasonable defenses. First, Napster hadn’t yet lost the record industry suit when the firm invested. Second, directors and investors are rarely held liable for the acts of their companies. In those cases in which individuals are held responsible, they typically own 100% of the company at fault. The suit “is stretching contributory infringement way beyond where it’s ever gone,” said Wayne State University copyright law professor Jessica Litman. “I assume the purpose is to enhance the already significant chill discouraging people from investing in businesses that challenge the business models of the entrenched market leaders in the entertainment industry.” Indeed, a federal lawsuit filed by a music producer against Barry, Hummer Winblad and others was dismissed after a judge found that the accusations — similar to those in the record labels’ suit — were too vague and that there was nothing in the copyright law to punish people who assist an entity that assists others in breaking the law. “Courts have consistently held that liability for contributory infringement requires substantial participation in a specific act of direct infringement,” U.S. District Judge Marilyn Hall Patel wrote in that case. But the two record labels may have evidence of specific actions by the venture firm’s principals. And Hummer Winblad could be hurt by the fact that Napster lost most of its court battles. The plaintiffs have “a reasonable shot at the officer. I think the director is a little tougher, and the shareholder theory is really tough,” said Radcliffe, who represents technology and entertainment firms. Barry and Hummer anticipated that they might be sued and tried to negotiate protection from legal consequences when German media firm Bertelsmann was planning to buy Napster early last year. Those talks foundered, and Bertelsmann itself has been sued for its investment in Napster. The venture capital trade association complained that with such actions against investors, “the ability of entrenched industries to deter investment in next-generation technologies has profoundly anti-competitive and anti-innovative implications.” But not everyone agreed that the labels’ suit will change how Silicon Valley firms invest. As the suit notes, other venture firms had deep concerns about Napster’s legality and didn’t invest. “Top firms don’t take their cue from Hummer,” said Steve Lisson, publisher of InsiderVC.com. Los Angeles Times Articles Copyright 2013 Los Angeles Times Terms of Service | Privacy Policy | Index by Date | Index by Keyword STEVE.LISSON, FACEBOOK, LINKEDIN, COURT, STEVE LISSON, STEPHEN LISSON, COURT, STEPHAN N. LISSON, STEPHAN LISSON, LISSON STEPHAN, AUSTIN, TX, TEXAS, COURT, STEPHEN N. LISSON, TRAVIS COUNTY, TEXAS, LISSON STEPHEN N., STEVE N. 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