InsiderVC.com *Following is a draft excerpt from* *Beardstown, err, Battery Ventures:* *The most overrated venture firm* *Part A: The three runners-up, and who to blame* IX. WILDNERNESS OF MIRRORS - Charles River Ventures (CRV) "I tell you, I've been over this stuff a bunch of times - it just doesn't add up. Who does these books? I mean, if I ran my business this way, I'd be out of business" (Murray Blum CPA to The President in the movie/Dave/, while the two friends were analyzing the Federal budget looking for savings). When the Federal government wants more money to spend on programs or people, it prints the money, borrows it, or raises taxes. If CRV needs money, then it can resort to extending the life of an ancient, almost fully wound-down fund. Only if a partnership can't raise more money does it goes into this mode, so the GPs can make their car and mortgage payments; otherwise, it's stubbornness, hopefulness, and nickel-chasing. /Wilderness of Mirrors/ was the title of a book about delusions induced by the inherent paranoia of a counterintelligence officer. Subtly, the principle works here, too. Anecdotally, every time a firm has extended the life of a fund, the performance has not improved appreciably if at all; frequently, the returns go down, not up. Why should a firm even concern itself with returns of an eleven-years old fund, especially if it has raised several more and should be more concerned with how to deploy the billion(s) it now manages - many times more than the runway left in or which could be squeezed out of a tiny, ancient fund from a decade ago? After all, that fund's performance has already been used to raised all the new billion(s) of fresh capital. Moreover, any marginal gain will be more than outweighed both by management fees and management "time-sink", further depressing any possible ROI. Answer? Those additional management fees. Depressing the IRR at this point, with all those new funds and fresh capital already raised, is the current (not former) CRV GPs' gift to themselves - enrichment -- however just it might be. Charles River Partnership VI (1990 - $50MM) as of 9/30 still held five investments costing $12.3MM but with, of course, all purported appreciation in value already factored into the IRR. Like proving perjury and conspiracy to defraud, it's not necessary to extract from the perpetrators a confession (and they usually aren't stupid enough to allow such a thing anyway). One need only look at the result, the practical effect, of extending the term of the partnership for two years (was 11 years commencing September 1990 subject to two one-year extensions) through 31 Dec 2002. Where's the measly $200,000 sum total going? Our vote says to the marketing partner hired around the same time as approval for the extension. Funny, that's also when the well-scripted, verbatim-like transcripts of Benchmark rumors began. Perversely, this twisted, sordid wilderness of mirrors (extending the life a fund to depress rather than juice or at best eke-out at most an imperceptible and possibly counterproductive gain) is further exacerbated by CRV capping the extension of Fund VI's fees, for liquidating those five investments, at $100,000 a year. How touching - and misplaced is the current group's priorities. Like the national Democratic Party, which lost the 1984 and 1988 U.S. presidential elections because it was still obsessed with holding congressional hearings into a fantastical "October Surprise" scenario (Reagan campaign manager William Casey ostensibly negotiating release of the Iranian hostages on the eve of the 1980 election) CRV's obsession with an eleven year-old fund is both product and end-result of one thing and one thing only. Matrix envy. Reacting to the first appearance of our Pecking Order, CRV's in-house fluffer began inserting the following mantra into press releases: "Throughout the past decade, Charles River funds have been among the industry's highest performing funds according to Venture Economics, a division of Thomson Financial Securities Data that covers investment, exit and performance activity in the private equity industry." Panicking after Waltham's Matrix Leading Venture Pack On Both Coasts in /The Boston Globe/, and despite our vociferously, vituperatively, pedantically discouraging such head-to-head comparisons, CRV went around loudly, persistently whining to anyone (notably /Upside's/ Patrick Meadows, who fell early and hard) willing and gullible enough to succumb, that it outperforms Waltham, Mass. neighbor Matrix. But the only same vintage year in which both raised money was . . . you guessed correctly. This same one at issue here. The fact is the performance of Charles River Partnership VI (1990 - $50MM) fails when measured against Matrix Partners III (1990 - $80MM): only two-thirds the IRR% and less than half the POM% (Piles of Money: actual distributions of stock or cash expressed as a percentage of committed capital). However, the current iteration of CRV can console itself with the knowledge that this performance of their prior group does, in turn, top the results turned in by NEA V (1990 - $199MM). Regardless, industry practice should not leave fund extensions up to the personality of a preening, narcissistic GP already burdened with more time than sense, willing to saddle itself with such outsized, meaningless at best, and potentially harmful distractions. In the first weeks alone of its new $1.2BB Fund XI, CRV's drawdowns amounted to more than the 1.5 times the entire size of Fund VI. It bears repeating: the firm spent within mere weeks a greater sum out of just its newest fund alone (not counting the other active, large, quite young funds) than the total invested from this eleven years old partnership during its entire lifetime. Moral? Come to your senses! Get a life! Deal with your paranoia, cease the delusions, accept your place in the industry, congratulate yourself on superb (albeit deceptive) media-relations ROI, and move on. This shameless insecurity reveals CRV as a caricature of what it once was; nowadays, the firm is totally different -- people and profile -- from the days of Jack Neises and Rick Burnes, then later Don Fedderson. "Facts that are not frankly faced have a habit of stabbing us in the back." (Sir Harold Bowden). So, unfortunately, you can't look at the stellar history and make positive judgments about today's group. Too great a contrast. Apples vs. oranges. */See Also:/* *crv@InsiderVC.com* Copyright © 2015 All Rights Reserved This page reviewed and/or edited: Monday, 25 February 2002 12:13 AM

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TheStandard.com

Fallen VC Idols

By Gary Rivlin and Lark Park

They talk about it at their children's school plays. They ask the question

at Palo Alto power lunches: Who among them, the Silicon Valley

venture capitalists wonder, will be first to turn in a lousy return for their

funds?

It's a question no one asked in the boom times, but this is a very

different world for VCs. Venture investing in the first quarter of 2001

was down 59 percent from record highs. Dozens of venture-backed

dot-coms have gone out of business, and hundreds of others are still

years away from profits. Funds that invested rapidly at the peak of the

frenzy have seen the value of their investments fall 75 percent or more.

"There are some big-name funds out there in trouble, there's no question

about it," says Kathryn Gould, an 11-year industry veteran and a partner

at Foundation Capital, echoing a sentiment expressed by many VCs. "I

hear it from our limited partners, who are invested in a lot of the big

funds."

The limited partners - wealthy individuals, pension funds and college

endowments that invest in venture funds for double-digit returns - are

bracing for single-digit returns this year, well below the triple-digit

returns seen in 1999 and even the average 27 percent return over the

past 10 years. In the worst-performing funds, the limited partners could

face losing the capital they originally invested.

It's no surprise that plenty of also-ran venture shops and incubators that

popped up during the bull market are struggling with soured

investments. Many limited partners sought out the top VC firms

precisely to avoid such a risk. But some of those top firms - the ones

that supposedly had the wisdom and experience to know better - made

what now look like serious missteps at the height of the bubble. They

often focused on dot-coms with little hope for profitability. Worse, they

invested so quickly that they had little left over to nurture startups

through the downturn that followed. Now Draper Fisher Jurvetson,

Hummer Winblad, Redpoint Ventures, Softbank Venture Capital - even

the undisputed superstar of the venture world in the second half of the

1990s, Benchmark Capital - are sitting on at least one problem fund.

REPERCUSSIONS OF THINGS PAST Several leading VC firms

raised funds during the peak of the Internet bubble. But five -

Benchmark Capital, Draper Fisher Jurvetson, Hummer Winblad,

Redpoint Ventures and Softbank Capital Partners - were aggressive

in investing much of their funds early in now-struggling dot-com

startups. FIRM FUND YEAR RAISED AMOUNT (IN MILIONS)

% OF FUND IN- VESTED % OF MONEY RETURNED TO

INVESTORS % OF COMPANIES FUNDED AFTER APRIL 2000

**** DIVERS- IFICATION FACTOR Benchmark Capital

Benchmark III 1998 $149 100%** 0%** 53% Poor Draper Fisher

Jurvetson DFJ V 1998 $180 80%** 24%** 44% Moderate Hummer

Winblad Hummer Winblad IV 1999 $315 75%*** N/A 48% Poor New

Enterprise Associates NEA IX 1999 $871 65.1%* 0%* 68% Good

Redpoint Ventures Redpoint I 1999 $600 60%* 0%* 66% Moderate

Softbank Venture Capital Softbank V 1999 $600 100%** 0.01%**

50% Poor US Venture Partners USVP VI 1999 $278 84.3%* 0% 55%

Good *As of Sept. 30. **As of Dec. 31. ***Estimate. **** Excludes

companies that have gone public or been acquired. Sources: Insider

VC, Venture Economics and Venture One

Of course, many venture funds are still so young that a couple of big hits

could cover a long list of bad bets. In the image-obsessed world of VCs,

however, even one down year is the kind of thing that could tarnish a

firm's reputation.

"The way venture capital works, or at least used to work, was you

invested in a fund over two or three years so you captured several years'

worth of trends," says one longtime venture capitalist who, like most

VCs and limited partners interviewed for this story, would only speak

anonymously. "But in '99, you saw some well-known VCs go through

their whole wad in a six- to nine-month time frame, so they only

captured a partial year of trends. Those are the funds the limiteds are

worried about."

Eighteen months ago, a venture fund reporting a negative return was

unthinkable. The Nasdaq was climbing toward 5000. Tech IPOs were

tumbling out the door, with investment bank analysts minting new

metrics to justify the skyrocketing stock prices. So venture capitalists

blithely laid down tens of billions of dollars on dot-coms. The biggest

risk VCs faced seemed to be missing out on the next eBay.

"If a deal was hot enough, you locked the door and didn't let the

founders out until they had at least verbally committed to a deal," says

Neil Weintraut of 21st Century Internet Venture Partners. "We realized

only once it was too late that we forgot to pay attention to this one

important factor called profitability." It's a confession akin to a pro-ball

scout proclaiming a player has all the intangibles to become a starter in

the NBA - except he can't shoot.

VC money legitimized the dot-coms, and stock investors legitimized the

investments with inflated valuations. The highest-profile VCs got drunk

on their own celebrity and personal wealth. At the peak, stars such as

Redpoint Ventures' Geoff Yang were wondering aloud whether there

was any downside left in the game. "If the company doesn't work out,

we'll sell for $150 million," Yang told Fortune in 1999. "If it does, it'll

be $2 billion to $10 billion. Tell me how that's risk."

Yang got his answer when stocks crashed in 2000. Now the wider world

no longer buys the story that dot-coms will rule the world; those flying

the highest during the boom times are today's goats. The technology

world's best-known investment bankers operate under a cloud of

scandal as federal investigators question the legality of their IPO

allotment practices. The Internet's best-known research analysts are

reeling from charges they touted highly speculative stocks more out of

self-interest than in a belief in companies whose shares are now trading

90 percent or more off their highs. And the venture capitalists, once

lionized for their ability to spot huge hits, are getting their comeuppance.

Last week, for instance, Webvan, the ultimate VC poster child last week

was worth $77 million, down from a market capitalization of $2.5 billion

only nine months ago.

Venture capital firms hold information about their funds' performance

close to their chests - especially the current valuation of their

investments. Even so, there are plenty of clues that point to a fund in

trouble: How close is it to prematurely spending all the money it raised?

How many of its companies have been able to raise money since the

stock market crashed? How much of the fund did the firm plunk in the

dot-com pot? How many startups have gone out of business in the fund's

short life? And how much money are limited partners getting back on

their investments?

FIRM DESCRIPTION COMPANIES IN FUND INCLUDE ...

Draper Fisher Jurvetson Led by Tim Draper, DFJ charged into the

online retailing and b-to-b sectors in its fifth and sixth funds. More than

half the companies in the fifth fund have yet to raise new funding in a

tough market. BestOffer.com, DigitalWork, Everdream,

InfoRocket.com, SeeUThere.com Hummer Winblad John Hummer and

Ann Winblad have never produced a home-run investment. It is unlikely

that its fourth fund, the first to focus on the Internet, will improve the

firm's track record. Homes.com, Lavastorm, Mambo.com, Pagoo.com,

Rivals.com Redpoint Ventures Geoff Yang and his five partners

invested in 40 startups in 14 months. Their silver lining: More

investments in infrastructure firms than in dot-coms. BigBand

Networks, eNet China, HelloBrain, MetaTV, TeraOptic Networks

Benchmark Capital The firm's third fund, raised in 1998, was alm! ost

exclusively invested in dot-coms. David Beirne and Benchmark partners

opted to spend most of the fund's capital in nine months. Collab.net,

Epinions.com, Guild.com, Living.com, Respond.com Softbank Capital

Partners Gary Rieschel admits his fund was overweighted in sectors

that "got smashed." He's already telling investors the best they can

expect are money-market-like returns. Asia Online, BlueLight.com,

iChristian.com, Rentals.com, Secure Commerce Services

. Steve Lisson devotes his time to such questions. He is at once an

industry gadfly and a font of information on venture funds; his Web site,

InsiderVC.com, is followed closely by many in the business. With the

help of Lisson and research firm Venture Economics, The Standard has

assembled profiles of major VC funds raised in 1998 and 1999. Because

dozens of funds opened during the peak of the tech bubble, we limited our list to several high-profile firms.

While any fund raised during the last few years is enduring tough times

now, not every one is in the same boat. Funds raised by Battery

Ventures, Kleiner Perkins Caufield & Byers, New Enterprise

Associates, Sequoia Capital and US Venture Partners have their share of

ailing dot-com investments. But they diversified into areas like biotech,

networking and software for big companies. Also, they didn't spend their

money as quickly as Benchmark and Draper did with their vintage 1998

funds, or as Hummer Winblad, Redpoint and Softbank did with their

1999 funds. The latter are the ones slowly coming into focus as strong

candidates for subpar performance.

Any recitation of the funds in greatest jeopardy should start with

Hummer Winblad and Draper Fisher Jurvetson. Ann Winblad and Tim

Draper, the public faces of their respective firms, are better known for

being well-known than for their skill at spotting promising startups.

Winblad is a columnist for Forbes ASAP, and Draper is an investor in

Upside and a long-time friend of Tony Perkins, who founded both

Upside and Red Herring magazines. Yet both firms have suddenly

turned press-shy. Representatives of the two firms declined to comment

for this article.

After mixed success in three funds that focused on software companies,

Hummer Winblad raised $315 million for its fourth fund, which it

invested almost entirely in Internet ventures. "It's like the entire

portfolio was made up of dot-com, swing-for-the-fences deals," says a

limited partner for one of its funds, who asked not to be named.

So dismal are the prospects for Hummer's fourth fund - among its were a

laundry list of dot-bombs including Gazoontite, HomeGrocer, Pets.com

and Rivals.com - that general partner John Hummer recently felt

compelled to send a letter to its limited partners. "It is an

understatement to say how bad we feel about this," he wrote.

For his part, Draper took a scattershot approach that not only backfired

when the dot-com sector collapsed, but also made the firm look

careless. "I don't even count Draper as a real venture fund," says an

institutional investor who has money in roughly 50 venture funds.

"They're like this index fund that indiscriminately invested in

everything."

Both Draper V, a $180 million fund, and Draper VI, which raised $375

million, are full of businesses with an online angle. Four companies in

Fund V are already out of business. Draper VI has its share of firms

from the Internet bubble, including Club Mom, a content site for

mothers; Amazing Media, a banner ad technology firm; and Product

Pop, an Internet-marketing services company.

Draper did hit it big recently. Cyras Systems, a fiber-optics firm in Fund

V, was acquired in March for $1.15 billion in Ciena stock. That's a

significant score - but it's questionable whether Draper's take will be

enough to balance out the other dogs in the fund.

Redpoint is a venture capital supergroup, with partners who defected

from Institutional Venture Partners and Brentwood Venture Capital. But

the firm's first fund, which raised $600 million, so far has been short on

successes.

The six partners at Redpoint took just 14 months to invest in 40 startups,

most of them Internet-related. There was an $8 million investment in

BizBuyer.com, a b-to-b company that closed shop last year, and $22

million in NexGenix, one of many companies created to build

e-commerce sites. Other investments include $3 million in an online

beauty site, $4 million in an e-commerce company called eNet China

and $6 million in a sci-fi Web site that shut down operations in April. A

year ago, NexGenix filed to go public - Redpoint's first chance to cash

out and distribute the proceeds to its limited partners - then pulled the

offering in May. Four months later, NexGenix laid off an unspecified

number of employees.

Redpoint's two saving graces were that it set aside about half its fund to

keep its startups going and that it invested outside the dot-com realm.

Yang figures roughly 70 percent of Redpoint's first fund is invested in

infrastructure and software firms, though many were e-commerce

companies that have shifted their focus hoping to stay alive. "At least

we don't have 70 percent of the fund in e-retailing," he says.

Fate has been a little less kind to Softbank Venture Capital. The $600

million Fund V invested in 48 startups in approximately 12 months,

including companies such as Buy.com, eCoverage, eOffering.com,

Perfect.com and Rentals.com. The portfolio also includes iChristian, an

online religious bookstore, More.com and Urban Media

Communications, all of which have gone out of business; BizBlast, a

company that hoped to help small businesses get on the Web but ended

up laying off more than half its staff last fall; and iPrint.com, which

went public just prior to the spring 2000 crash and traded last week at

less than 50 cents a share.

According to Lisson, Softbank V has already parceled out all of the

fund's money yet has distributed no money to investors. Softbank VCs

admit the fund overindulged in vulnerable sectors.

"We were overweighted in services, and when that sector got hit our

fund got smashed," says Gary Rieschel, executive managing director of

Softbank Venture Capital. "We were also overweighted in Internet

consumer and business-to-business, rather than core technologies."

Still, Rieschel pledges, "we'll have a few nice pops and even a couple of

home runs." He's already told the fund's limited partners they can expect

a return of 150 percent to 200 percent. That might sound like a good

payoff, but funds typically have a 10-year life span. Doing even the

more optimistic math means this comes to about 7 percent a year, which

is barely better than a regular money-market account, despite the

enormous risk inherent to venture investments during an economic

slowdown.

Perhaps the biggest disappointment comes from Benchmark, a firm

whose towering reputation gives it that much further to fall. The firm's

success with Ariba and eBay sealed its reputation as one of the most

successful VC firms of the late '90s. How, then, does it get lumped

together with Hummer and Draper when insiders mention troubled VC

funds?

Mainly because of the performance of Benchmark III, the firm's third

fund. The fund raised $149 million in the second half of 1998, and then

spent all that cash in nine months, a fraction of the three-year average

before 1998. In all its other funds, Benchmark has invested in 21

networking-equipment and semiconductor startups, 10 software

companies and another six firms in the wireless market - but fund III has

only one investment in any of these categories: Collabra, a software

company. The fund has three investments in networking services

companies.

According to Lisson's data on Benchmark III, the partners invested in

24 startups, including Epinions.com and Living.com. By last fall,

though, the fund was down to a portfolio of 18, half of which were in

online retailing, with another three in the business-to-business sector.

Four others have since gone out of business, including Great

Entertaining and CharitableWay.com, representing more than $20

million in losses. Of the remaining companies, five have struggled with

cutbacks and layoffs.

Benchmark partner Kevin Harvey denies that Benchmark III is

performing poorly: "I feel confident that fund three will perform at the

top of its class." He also says that Benchmark IV - raised in 1999 - is

already proving a success with two public offerings.

Benchmark had always defined itself strictly as an early-stage investor,

but when it invested $19 million in 1-800-Flowers, the partners rolled

the dice on a "mezzanine" investment - an investment in a company

poised to go public. That proved costly. 1-800-Flowers is the one

company in the fund that has gone public. But by September 30, 2000 it

had racked up a loss exceedig $10 million for the fund, according to

InsiderVC.com. After publication of this story, Benchmark said that loss

has fallen to $2 million.

Compounding its bad bets, Benchmark failed to hold back enough of its

reserves for further financing. VCs usually reserve about half of a fund's

cash to make later investments in its most promising companies. Within

the venture world, it's generally frowned upon to pull money out of a

new fund to salvage a company funded by a previous one. According to

its contract with limited partners, Benchmark is permitted to crosspollinate

between funds, but doing so, experienced VCs say, raises the

question of whether you're trying to cover for old mistakes with new

money.

In general, VCs try to avoid such cross-fund investments. "It's

something you should do very rarely and only when you have complete

confidence in a company," says Geoff Yang, a 16-year VC veteran.

"Otherwise, there are huge opportunities to get second-guessed by your

limited partners, who might think you're using one fund's money to prop

up the investment of another." On at least three occasions, Benchmark

has dipped into fund IV to invest in fund III companies, including a $3

million investment in the now-defunct Living.com.

Still, Benchmark remains confident in fund III's long-term performance.

Despite the carnage so far, the firm is convinced at least five of the

surviving companies could single-handedly provide a $1.5 billion return.

VCs by nature are an optimistic bunch, but the boys of Benchmark may

be an extreme example of the breed. The world around them has

changed dramatically, yet they still believe that a $1 million investment

in fund III will eventually return $150 million to investors.

That would take quite a turnaround. Until then, Benchmark, like other

VC firms with hangover funds, can try again with newer funds, for

which they've so far had little problems raising money. The question is,

will their reputations recover as easily?

Kathi Black, Diana Moore, Katie Motta and Jeff Palfini contributed to

this report.

CORRECTION:

An earlier version of this article should have stated that Benchmark

Capital's third venture fund has invested in a software company,

Collabra. Also, due to an editing error, the story should have stated that

Benchmark III has no investments in networking equipment, and that

the $10 million loss the fund faced on an investment in 1-800-Flowers

was as of Sept. 30, 2000.

Earlier stories from TheStandard.com:

Floyd Kvamme: The Emissary

Dado Banatao: The Adventure Capitalist

The Retreat of the VCs

Money Watch

Venture Buzz: Putting Its Billion to Work

STEPHEN LISSON, STEPHAN LISSON, STEPHEN N. LISSON, STEVE LISSON, STEVEN LISSON, STEVEN N. LISSON, INSIDER VC, INSIDERVC, INSIDERVC.COM

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Development Plans Slated for Innovative Line of Information Services

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Sunday, November 9, 2014

Development Plans Slated for Innovative Line of Information Services

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MAGAZINE ARTICLE

Information Today , Vol. 6, No. 9 , October 1989

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Development Plans Slated for Innovative Line of

Information Services

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Article excerpt

Development Plans Slated for Innovative Line of Information Services

Legislative Information Network Corporation (LINC), an Austin-based 9rm, has

announced plans to develop and market answer-oriented information services

designed to enable businesses, organizations and professionals to stay current with the

ever-changing legislative and regulatory fronts in any state in the nation. The

cornerstone of this effort will be a single, comprehensive database and information

retrieval system comprised of the full-text of all bills, amendments, resolutions,

committee votes, ;oor votes and the like from the legislatures in all 50 states. LINC's

system will obtain, monitor, merge, correlate and compare all existing and proposed

state law, legislation, regulations and key demographic statistics on a single or

multi-state basis. LINC will offer the opportunity for customers to have every proposal

under consideration by state legislatures and regulatory agencies electronically tracked

according to their concerns. The system will also permit cross referencing of proposed

laws and regulations and compare these proposals with existing and/or proposed

changes in other states.

"State government shapes the world we live in. From economic development to gun

"Development Plans Slated for Innovative Line of Information Services" - ... https://www.questia.com/magazine/1G1-8072329/development-plans-slat...

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control to taxation, legislation and regulations can have far-reaching effects," said

Stephen N. Lisson, CEO. "LINC will provide businesses, professionals, government

agencies and associations with a powerful tool - the equivalent of legions of staff

reading every line of every bill every day."

LINC's entry into the estimated $21 billion information-vending industry is a response

to two key factors. The 9rst is the endless array of proposed laws and rules being

considered by state legislatures and agencies. These government actions can materially

affect the operations of businesses, organizations and governmental entities, not to

mention a company's bottom line. The second factor LINC is responding to is the lack of

a single, comprehensive, timely source of information regarding legislative and

regulatory changes. …

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Monday, March 10, 2014

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Venture Capital Financing Is Further Sapped by Events - NYTimes ...

www.nytimes.com/2001/09/26/.../26VENT.html

The New York TimesSep 26, 2001 - Steve N. Lisson, editor and publisher of InsiderVC.com, said recent events were reminiscent of the time around the gulf war, when the industry ...

New Enterprise Is Huge and Proud of It (washingtonpost.com)

www.washingtonpost.com › ... › The Dealmakers

The Washington PostDec 6, 2004 - Steve Lisson, the editor of InsiderVC.com, takes a dim view of NEA's size. ... of smaller funds," said Lisson, whose company provides analysis of ...

Find Pickup Basketball Games - steve.lisson - Nofouls

nofouls.com/user/17646/stevelisson‎How to find local basketball courts and pick-up basketball games in my area.

Forbes.com - Magazine Article

www.forbes.com/asap/2001/0910/022_print.html

ForbesSep 10, 2001 - But venture capitalists had better keep investing, warns Steve Lisson, who runs the popular InsiderVC.com. According to data tracker ...

Pa. pension data leave questions about returns - Philly.com

articles.philly.com/.../25443104_1_pension-system-retirement-investmen...‎Oct 13, 2005 - Steve Lisson, publisher of the Texas-based private-equity newsletter InsiderVC.com, questioned the teachers' system's basis for not disclosing ...

Matrix Partners | Matrix Partners

www.matrixpartners.com/press.../matrix_edges_kleiner/

Matrix PartnersJan 29, 2001 - Using the data of Steve Lisson, editor of InsiderVC.com, who tracks VCs' performance and considers Matrix and Kleiner the top VCs, we ...

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Saturday, November 30, 2013

LISSON, STEVE

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LISSON STEVE

- Menn,J. All the Rave. 2003 (218, 319)

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Lisson v. ING GROEP N.V. | Stephen N. Lisson Austin TX

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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.

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Friday, November 29, 2013

Barron's

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What Goes Up:

After soaring, this year's IPOs have returned to earth

By Jack Willoughby

12/11/2000

Barron's

Page 35

Much of the cleanup remains to be done. Many famous venture capital firms are stuck with huge amounts of devalued stock. "Most of those triple-digit returns that venture-capital firms are so fond of reporting will never materialize because they are not based on reality," contends Stephen N. (Steve) Lisson, Austin-based editor of InsiderVC.com, which tracks performance. "Sure, the dot.com fallout has been gruesome, but much of its effect still remains hidden. Even today many VC funds are still reluctant to write down their investments because they want to keep attracting new capital."

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Matrix Edges Kleiner

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Matrix Edges Kleiner

by Paul Shread

January 29, 2001--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.

Using the data of Steve Lisson, editor of InsiderVC.com, who tracks VCs' performance and considers Matrix and Kleiner the top VCs, we applied a metric suggested by former Flatiron partner Dan Malven, which we will call the "Malven Metric."

Malven suggested the metric after our piece comparing Kleiner's performance in the IPO market last year with four other firms. In short, we divide overall performance by the number of partners, thus measuring wealth created per partner.

Malven cautions that that measure of performance could be skewed if each partner at one firm has a lot more to invest than partners at another firm, but Kleiner and Matrix appear pretty evenly matched. Matrix IV in 1995 was a $125 million fund (and had distributed 11 times that amount to its limited partners by the middle of last year, according to Lisson), and Matrix V in 1998 was a $200 million fund that had already distributed four times its LPs' capital by mid-2000. Using the conservative figure of five partners during the time that 2000 IPOs were being funded, that means Matrix partners had $65 million each to work with. (We did not include Matrix VI, a $304 million fund that was only 30% invested as of June 30 last year.)

Kleiner VIII in 1996 was a $299 million fund that had returned 12 times its LPs' capital by mid-2000, according to Lisson. Kleiner IX in 1999 was a $460 million fund that was 80% invested by mid-2000. Using the conservative figure of 13 partners, Kleiner partners had $58 million each to work with.

Now on to the 2000 results. Ten of Kleiner's companies went public in 2000 (0.77 IPO per partner), compared to 4 for Matrix (0.80 IPO per partner). Kleiner's stake in those companies was worth about $2.3 billion when the lock-up period expired (one company, Cosine Communications, is still in lock-up, and Kleiner's stake in the company is worth about $100 million). Matrix's stake in its four IPOs was worth about $1.6 billion when they came out of lock-up. That gives Matrix a per-partner return of $320 million, and Kleiner $177 million, giving the edge in per-partner wealth creation to Matrix.

A few caveats on those results. First, we measured performance in the IPO market only; we did not look at acquisitions, the number of which often exceeds IPOs in a given year. Second, Kleiner has two health care partners, according to Malven. Since health care companies had a tough year in the IPO market last year (Kleiner had no health care IPOs), reporting the results based on IT partners only raises Kleiner's per-partner wealth creation to $209 million. We certainly want our top VCs to focus on the future of health care regardless of market conditions, and there's been quite a debate going on within the venture capital industry about IT versus health care investing. The third caveat is that Kleiner IX is the newest of the funds measured, so that too could give Matrix an edge. But don't feel too bad for Kleiner; according to Lisson, 6-year-old Kleiner VII was the best-performing venture fund last year, still riding high on its monster hit Juniper Networks (NASDAQ:JNPR). That fund has returned more than 20 times its limited partners' capital.

Matrix's big hit of 2000 was Arrowpoint Communications, which netted Matrix $1 billion when it was acquired by Cisco (Nasdaq:CSCO) in June. Kleiner had holdings in three IPOs that were worth $500 million or more when they came out of lock up: ONI Systems (Nasdaq:ONIS), Handspring (Nasdaq:HAND) and Corvis (Nasdaq:CORV).

It's not clear when or if the VCs sold shares in the IPOs. Cisco's stock, for example, has declined almost 40% since the Arrowpoint deal closed. Kleiner's biggest winners have held their value since the lock-up period expired, but both companies had holdings that declined substantially from their lock-up expiration price.

Both firms also had about $2 billion each in 1999 IPOs that came out of lock-up in 2000, giving Matrix the "Malven Metric" edge there too.

But as Lisson pointed out, "This is splitting hairs amidst the pinnacle of the field. A fun, interesting and worthwhile analysis, but the distinction makes no difference to investors in these funds. The amounts of money involved are trivial when viewed in context, the venture capital segment in the alternatives portion of an entire portfolio. Nonetheless, the LPs of both Kleiner and Matrix can thank their lucky stars to be in these funds. It is amazing how these and a few other elite firms can put so much distance between themselves and the rest of field, repeatedly, in bad times as well as good."

And finally, a follow-up to last week's column on Summit Partners, the most recent firm to join the elite $2 billion fund club. Lisson had this to say of Summit: "As a private equity investor, Summit can outperform some early-stage VCs, the reverse of how it's supposed to work. Now that's a firm where unquestionably 'there's something in the water' consistently over the years."

Corey Ostman of Alert-IPO and Mary Evelyn Arnold of VC Buzz provided research for this article.

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STEPHEN N. LISSON, Plaintiff

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V I R G I N I A :

IN THE CIRCUIT COURT FOR THE CITY OF RICHMOND

John Marshall Courts Building

400 North Ninth Street

STEPHEN N. LISSON, )

)

Petitioner, )

)

v. ) Case No.: HQ-2029-4

)

VIRGINIA RETIREMENT SYSTEM )

)

and )

)

WILLIAM H. LEIGHTY, )

Respondents. )

ORDER

On the 30th day of October, 2001, came the parties in person and by counsel upon the Petition; upon the Grounds of Defense; upon the Demurrers; upon evidence heard ore tenus; upon the representation of the parties that a settlement had been reached and was argued by counsel.

UPON CONSIDERATION WHEREOF, the Court finds that Plaintiff’s Petition is sufficient to state a cause of action; that the Demurrers should be overruled; that the parties have arrived at a settlement whereby: (1) Respondents have agreed to pay to Petitioner the sum of Seven Thousand Dollars and no/100 ($7,000.00); (2) the Petitioner has agreed to a dismissal with prejudice of all of his outstanding claims against Respondents; and (3) Respondents have agreed that the dismissal of claims by Petitioner shall not prejudice any right he has or may have to obtain documents from Respondents subsequent to October 30, 2001, whether such requests for documents be for the same documents previously requested or documents similar thereto or documents of any nature whatesoever.

Accordingly, it is ORDERED that this cause be and the same is hereby dismissed with prejudice;

And this cause is hereby removed from the docket and placed among the ended causes.

ENTER: / /

__________________________________

Judge

We Ask For This:

____________________________p.q.

Larry A. Pochucha, Esquire

Attorney for Stephen N. Lisson

VSB No. 15674

COATES & DAVENPORT

5206 Markel Road