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Monday, January 12, 2015
Steve Lisson Austin TX Stephen N. Lisson Austin Texas
*High tech's bloom has faded for Paul Allen *
/Friday, March 9, 2001/
*By JOHN COOK <mailto:johncook@seattle-pi.com>*
SEATTLE POST-INTELLIGENCER REPORTER
Is Paul Allen -- who made his fortune in technology -- shying away from
his first love?
Recent moves indicate that he is.
During the past 18 months, the Mercer Island billionaire has liquidated
ownership positions in Priceline.com, Egghead.com, Internap, Viewpoint
Corp., Allegiance Telecom and Zany Brainy. He didn't exercise an option
to buy more of online financial news site TheStreet.com. And he pulled
the plug on Bellevue-based Mercata in January. On top of that, Allen
last year sold $8.5 billion worth of Microsoft Corp. -- the software
company he co-founded with high school buddy Bill Gates in 1975.
During the 1990s, Allen and his team at Vulcan Ventures were some of the
most bullish technology investors pumping billions of dollars into more
than 100 Internet, media and communications companies. The investments
ranged from the high-profile and now-defunct Internet film studio
Pop.com to online postage company Stamps.com. All were to be building
blocks in Allen's so-called wired world strategy.
Although Allen has always touted himself as a long-term investor willing
to ride out choppy markets, beginning in late 1999, the world's
third-richest man started aggressively selling. That trend shows no sign
of abating.
Now Allen's trusted money manager, Bill Savoy, says Vulcan's portfolio
of publicly traded tech companies has dwindled to the point where "I
don't have a whole lot left to sell," and the appetite for new
technology investments "is significantly reduced as we go through this
correction." Allen continues to hold significant stakes in cable
companies such as Charter Communications, but tech investing has
declined in recent months.
"I think that the total restructuring of technology is just beginning as
opposed to nearing an end," Savoy says.
Vulcan is acting like many venture capital firms these days: liquidating
shares, slowing down investments and adjusting to what many are calling
"the new paradigm."
Savoy says he is using the downturn in the market "to get our own fiscal
house in order and really understand where the pockets of opportunity
will be for the future."
And what about the "wired world"? Savoy says the strategy is alive and
well and while investments have slowed to a trickle, that is not to say
Paul Allen is no longer a believer in technology.
"The value contribution of technology has not been taken away," says
Savoy. "The price people are willing to pay for it has changed."
Savoy is making the "hard decision" to shut down or refuse to fund
poorly performing businesses.
"It is not the fun part of the job," he says. "But when you have a good
business model where the path to profitability is not clearly
identifiable, in this environment, the right thing to do is put that
opportunity on a shelf and wait for a different environment."
Yet, the mood at Allen-backed companies remains amazingly upbeat.
Mark Vadon, chief executive of online diamond retailer Blue Nile, said
Vulcan "is doing the right thing" as the venture capital firm cuts its
losses and turns off the funding spigot.
"They are seeing which companies have business models that can make it
to profitability," said Vadon, whose Seattle company raised an
undisclosed amount from Paul Allen last April. "If the answer is yes,
they are funding them. If not, they are shutting them down or backing
out." Of course, Vadon believes his company is one that will make it to
profitability before funding dries up.
So does Greg Drew, chief executive of online consumer electronics
retailer 800.com.
After raising more than nine venture capital rounds over a 26-year
career, the Portland entrepreneur knows that venture capitalists will
not always be there in a time of need. But he feels that Vulcan, which
invested in earlier rounds, has always been supportive of the company.
"We are bullish on our ability to raise the next round," he says.
Imandi.com vice president George Meng says he is confident as well.
"They have not indicated anything but their continued support of the
company in line with their investment last June," Meng said.
It is unlikely that all of Vulcan's Internet companies will be able to
raise more money in the future. Some may be able to turn the corner on
their own and receive even more attention from cash-heavy venture funds
like Vulcan. But others could very well fall by the wayside.
That's not bad for Vulcan, according to Stephen Lisson, who follows
the venture capital business as editor and publisher of InsiderVC.com.
"Slowing the investment pace and shutting down companies can only be a
healthy thing," said Lisson. "I wish a lot more traditional venture
capital firms would show a similar discipline."
Technology start-ups have always worn an investment from Paul Allen as a
seal of approval. But the billionaire's involvement has not always meant
success. Value America, Beyond.com, Reel.com, Pop.com, Mercata and
Priceline.com -- all of which were one-time Allen investments -- have
had their problems as of late.
Lisson said this is common for the venture capital business where most
firms get all of their payout through one or two "home runs."
So when The Wall Street Journal reported in December that the average
return for seven of Allen's investments from July 1998 to August 2000
was a loss of 43 percent it didn't really matter. Savoy says the article
was inaccurate anyway, using an initial public offering price as
Vulcan's investment point rather than the pre-IPO price point that he
paid. He did not disclose the fund's performance.
Although the financing environment has changed in recent months, Savoy
says he is dealing with the current climate based on past experience --
treating the bursting of the Internet bubble much like the biotechnology
bust of 1994.
Asked how long this shakeout will last, Savoy simply says: "Much longer."
------------------------------------------------------------------------
/P-I reporter John Cook can be reached at 206-448-8075 or
johncook@seattle-pi.com <mailto:johncook@seattle-pi.com>. For more
information on Seattle-area start-ups or venture capital firms, visit
www.seattlep-i.com/venture. <http://www.seattlep-i.com/venture>/
Steve Lisson Austin TX Stephen N. Lisson Austin Texas
Wednesday, December 31, 2014
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InsiderVC.com pierces the VC industry’s verbal fog – Steve Lisson, Austin Texas
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Sunday, December 28, 2014
Posted by Steve Lisson Austin TX at 12:07 PM
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Tuesday, December 9, 2014
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Posted by Steve Lisson Austin TX at 8:53 PM
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Posted by Steve Lisson Austin TX at 8:46 PM
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Steve Lisson | Stephen Lisson | Stephen N. Lisson | Austin Texas
Transparency. Let’s have a round of applause for
CalPers, the giant state pension fund, for transparency. Beth Healy of
the Boston Globe (8/17/2001) reports Money managers aghast that
pension investor shows returns, rankings. It’s a report card that has
rocked the secretive venture capital world, and one that even the `A’
students didn’t care to see displayed on the refrigerator. Calpers, the
giant California pension fund that sets trends for many large investors,
has posted on its Web site the performance of every venture or buyout
fund in which it’s invested for the past decade. Firms typically guard
these numbers carefully, but the Calpers chart even says which funds are
meeting expectations, and which are disappointments. … The industry
buzz around the report stems from the secrecy with which venture firms
and buyout artists guard the specifics of their returns. Virtually every
firm claims ”top quartile” performance, and the numbers they give out
are suspect, venture analysts say. Steve Lisson of Austin, Texas, on his
controversial Web site, InsiderVC.com, tracks venture returns by doing
his own calculations on venture portfolios. He is the only independent
source on such numbers and has drawn fire from some venture capitalists
for breaking the code of silence. … over the long term, Calpers has been
doing something right. As of March 31, its average annual return for 10
years of private equity investing was 17.5%. The Wilshire 2500 Index, a
broad stock market benchmark, was up 13.9% in that period. Would that the federal government would do the same with alleged investment programs like SBIR.
Carl Nelson Consulting
http://www.carl-nelson.com/government2001.htm
Published by Carl Nelson Consulting, Inc, 1325 18th St NW, Washington DC 20036
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Saturday, November 22, 2014
- Steve Lisson
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Stephen N. Lisson, Austin, Texas a minute ago
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Stephen N. Lisson, Austin, Texas
What’s a VC to Do?
Forbes.com
What’s a VC to Do?
Shelley Pannill, Forbes ASAP, 09.10.01
Someone’s always looking for a bargain.
As thousands of new economy startups crashed and burned this past
year, speculation mounted that the venture capitalists they once
enriched were now cautiously sitting on pots of gold and playing golf.
But the VCs we talked to say it’s only the limited partners, the
investors behind the venture funds, who get to perfect their putts.
So what are these high-powered moneylenders up to now?
Damage control. VCs, like the rest of us, have lost a lot of money
lately. Some 25% are expected to go out of business over the next
several years. “Sometimes your widget doesn’t widge,” says Alan Salzman,
founding partner at VantagePoint Venture Partners. He should know. His
firm recently faced the grim task of writing severance checks after one
bankrupt portfolio company’s management team had squandered its money.
Then there’s the job of smoothing things out at companies that survived
but were merged, downsized, or acquired. Says Philip Gianos of InterWest
Partners: “I’m acting like a marriage counselor, which is a full-time
job right now.”
Scouring the ocean floor. Last year, says one observer, “You felt
lucky to be able to invest in a new technology startup.” This year, VCs
get to play God, waiting to invest until impoverished companies are
desperate for cash. “I’ve been out bargain shopping,” says Heidi Roizen
of Softbank Venture Partners, sipping chardonnay on a rolling lawn at
the Atherton, California, home of a fellow VC. “I can’t believe these
valuations!”
Revisiting old friendships. Last year’s “shootouts” for deals have
subsided. VCs are again finding synergies with competitors. “The
tourists are gone,” says Accel Partners über investor Jim Breyer,
alluding to the rush of cash-happy hobbyists–both individuals and
companies–combing the landscape for gold in recent years.
Business as usual. Sort of. VCs are doing what they do best:
investing in startups, although the pace has slowed. According to
research firm Venture Economics, VC investments have fallen by nearly
two-thirds, from $27.2 billion in Q2 last year to $10.6 billion in Q2
this year. Still, they’re actually spending more this year in some
sectors, such as wireless, biotechnology, fiber optics, and data
storage. E-commerce, of course, was the big loser, with VC investing
sinking from $210 million in the first quarter of last year to $3.3
million by the fourth quarter.
But venture capitalists had better keep investing, warns Steve
Lisson, who runs the popular InsiderVC.com. According to data tracker
VentureOne, 27 venture capital firms have completed raising funds of
more than $1 billion each since the start of the dot-com doldrums in
spring 2000. Says Lisson: “They’ve got to use it or lose it.”
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Posted by Steve Lisson Austin TX at 12:02 PM
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Friday, November 14, 2014
Stephen N. Lisson, Austin, Travis County, Texas, Steve Lisson, Austin, Travis County, Texas
Stephen Lisson, StephenNLisson, Stephen N. Lisson, Austin Texas, Austin TX
Financial Investors? Us?
InsiderVC.com pierces the VC industry’s verbal fog.
1 April 01 12:14, Tsafrir Bashan
Stephen N. Lisson, Austin, Travis County, Texas, Steve Lisson, Austin, Travis County, Texas
Anyone carefully following the venture capital industry in Israel and
overseas recognizes the routine. Managing partners talk at length and
with great passion, but with very little substance. They gossip
endlessly about the industry. What about the industry’s numbers? “We
don’t disclose private data,” is the stock reply from industry players.
Today, for example, everyone knows that the situation is bad, but it
is hard to say who exactly is in a bad position. You won’t find a fund
partner talking animatedly about a company shutting down or about a down
round. The most you can expect is an admission that not everything is
perfect.
The absence of data is both odd and entertaining, particularly for an
industry in which capital, finances, and yield are the key words.
Without figures on the amount of a company’s holdings or valuations, the
pompous phrase, “added value,” is all the venture capital industry has
left to talk about. It is difficult to find a financial industry at any
point in history that has provided so few figures. (Venture capital is a
professional investment industry, regardless of how many partners talk
about opening doors and assistance in recruiting executives).
Against this rather frustrating background, it is worth consulting
the US web site insiderVC.com. The site provides data for companies in
the industry, such as profit and loss allocations between the general
partner and the investors (the carry), the exact rate of management
fees, and exact investments and valuations for portfolio companies at
the various financing rounds. Of course, the site also includes
derivative data, such as the internal rate of return (IRR) and the
realization ratio. In other words, it provides the tools needed to
compare various organizations and even different funds within the same
organization, information you will not get from your local venture
capital management partner.
In order to gain access to all this data, you have to pay a
considerable fee, but you can get a preview of the statistics and a
sample of site editor Stephen Lisson’s sharp tongue free of charge. You
won’t find better material on the web.
Published by Israel’s Business Arena on March 29, 2001
Stephen Lisson, StephenNLisson, Stephen N. Lisson, Austin Texas, Austin TX
Stephen N. Lisson, Austin, Travis County, Texas, Steve Lisson, Austin, Travis County, Texas
Posted by Steve Lisson Austin TX at 10:36 PM
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Posted by Steve Lisson Austin TX at 10:35 PM
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Saturday, October 11, 2014
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Elite VC giants still investing – Steve Lisson, Stephen N …
Posted by Steve Lisson Austin TX at 10:42 AM
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Saturday, September 13, 2014
- STEVE
LISSON, AUSTIN, TX, STEPHEN N. LISSON, TRAVIS COUNTY, TEXAS, LISSON
STEPHEN N., STEVE N. LISSON, INSIDER, VC, INSIDERVC, INSIDERVC.COM
- http://rumorsofbenchmarksdemise.blogspot.com/
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- http://www.linkedin.com/pub/stephen-lisson/89/710/273
- Rumors of Benchmark’s Demise Greatly Exaggerated – Steve Lisson, Stephen N. Lisson, Austin, Travis County, Texas
- Stephen N. Lisson
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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.”
——————————————————————————–
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July 11, 2014
Thursday, July 10, 2014
July 11, 2014
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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InsiderVC.com founder and editor Stephen Lisson collected investment
information sent out by funds to potential limited partners (investors
in VC funds) and other sources for years.
TheDeal.com – Summit Partners crosses the pond
http://www.thedeal.com, 1 July 2001 [cached]
Europe is virgin territory for many VCs , says Stephen Lisson ,
founder and publisher of insiderVC.com , a Web-based newsletter that
tracks the industry.Venture capital is a very competitive business and
VCs are no longer content to do deals within a day’s drive from their
offices..He added that the recent push to Europe also reflects venture
capitalists’ search for deals at lower valuations than currently
available in the U.S..
Redherring.com – CalPERS tightens its grip on VC February 05, 2001
http://www.redherring.com, 5 Feb 2001 [cached]
Why are the firms opening themselves up to a co-CEO/hybrid
arrangement? asks Steve Lisson, CEO of InsiderVC.com.What am I missing
here.It reminds me of that cliché that a camel is a horse designed by
committee..
…
Mr. Lisson, who keeps a close eye on VCs, says he doesn’t expect
other pension funds or institutions to follow suit because the
advantages are unclear.In fact, there may be a disadvantage.For one,
other limited partners may be unhappy if another limited partner gets
closer to the firm’s general partners, because they might consider
themselves to be on unequal footing.CalPERS, which manages $ 170 billion
in assets, now has 4.6 percent of its fund invested in private equity
concerns.It has investment relationships with close to 100 VC firms.More
significantly, the pension fund now has equity stakes in three venture
capital firms, including Thomas Weisel Partners.
CNET.com – News – Investor – News – Story
http://www.cnet.com, 25 July 2001 [cached]
Even after a first day’s trading , VCs still have a lot of work and
uncertainty ahead of them , said Steve Lisson , president of
InsiderVC.com , based in Austin , Texas.They are still insiders ,
investors and board members.And they still haven’t made or lost any
money on the deal until they distribute or sell the stock , which cannot
be done overnight..On paper , VCs have been having a rough year.Venture
firms have had five consecutive quarters of declines , according to
research firm Venture Economics.Although they still made money during
the first three quarters , they dipped into the red during the last two
quarters–leading to an industry record of a 6.7 percent negative return
over a 12-month period.
Redpoint struggling to crank out results
http://www.insidervc.com, 7 Aug 2002 [cached]
“Historically, you only needed one monster hit to have a successful
fund,” says Steve Lisson, editor and publisher of InsiderVC.com.”With
funds of over half a billion in size, you’re going to need two or more
monster hits.”He said there is no tested model for managing VC funds of
over $1 billion in size: “It’s something that would worry me,” he says.
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. Take Brentwood’s 1998
fund.On March 31, 2000, the fund boasted a 160 percent “internal rate of
return,” according to InsiderVC data.
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Background
Employment History
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Founder and Publisher
InsiderVC.com
-
Chief Executive Officer
InsiderVC.com
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President
InsiderVC.com
25 Total References
Web References
For VCs the show is also over
http://www.networked-innovation.net, 19 Oct 2002 [cached]
InsiderVC.com founder and editor Stephen Lisson collected investment
information sent out by funds to potential limited partners (investors
in VC funds) and other sources for years.
TheDeal.com – Summit Partners crosses the pond
http://www.thedeal.com, 1 July 2001 [cached]
Europe is virgin territory for many VCs , says Stephen Lisson ,
founder and publisher of insiderVC.com , a Web-based newsletter that
tracks the industry.Venture capital is a very competitive business and
VCs are no longer content to do deals within a day’s drive from their
offices..He added that the recent push to Europe also reflects venture
capitalists’ search for deals at lower valuations than currently
available in the U.S..
Redherring.com – CalPERS tightens its grip on VC February 05, 2001
http://www.redherring.com, 5 Feb 2001 [cached]
Why are the firms opening themselves up to a co-CEO/hybrid
arrangement? asks Steve Lisson, CEO of InsiderVC.com.What am I missing
here.It reminds me of that cliché that a camel is a horse designed by
committee..
…
Mr. Lisson, who keeps a close eye on VCs, says he doesn’t expect
other pension funds or institutions to follow suit because the
advantages are unclear.In fact, there may be a disadvantage.For one,
other limited partners may be unhappy if another limited partner gets
closer to the firm’s general partners, because they might consider
themselves to be on unequal footing.CalPERS, which manages $ 170 billion
in assets, now has 4.6 percent of its fund invested in private equity
concerns.It has investment relationships with close to 100 VC firms.More
significantly, the pension fund now has equity stakes in three venture
capital firms, including Thomas Weisel Partners.
CNET.com – News – Investor – News – Story
http://www.cnet.com, 25 July 2001 [cached]
Even after a first day’s trading , VCs still have a lot of work and
uncertainty ahead of them , said Steve Lisson , president of
InsiderVC.com , based in Austin , Texas.They are still insiders ,
investors and board members.And they still haven’t made or lost any
money on the deal until they distribute or sell the stock , which cannot
be done overnight..On paper , VCs have been having a rough year.Venture
firms have had five consecutive quarters of declines , according to
research firm Venture Economics.Although they still made money during
the first three quarters , they dipped into the red during the last two
quarters–leading to an industry record of a 6.7 percent negative return
over a 12-month period.
Redpoint struggling to crank out results
http://www.insidervc.com, 7 Aug 2002 [cached]
“Historically, you only needed one monster hit to have a successful
fund,” says Steve Lisson, editor and publisher of InsiderVC.com.”With
funds of over half a billion in size, you’re going to need two or more
monster hits.”He said there is no tested model for managing VC funds of
over $1 billion in size: “It’s something that would worry me,” he says.
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. Take Brentwood’s 1998
fund.On March 31, 2000, the fund boasted a 160 percent “internal rate of
return,” according to InsiderVC data.
Posted by Stephen N. Lisson at 9:31 AM
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Austin Texas Stephen N. Lisson Austin TexasNew 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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Friday, November 29, 2013
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What Goes Up:
After soaring, this year’s IPOs have returned to earth
By Jack Willoughby12/11/2000
Barron’s
Page 35
(Copyright (c) 2000, Dow Jones & Company, Inc.)
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
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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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
P.O. Box 11787
Richmond, Virginia 23230
(804) 285-7000
Facsimile: (804) 285-2849
___________________________p.d.
Michael Jackson, Esquire
Attorney for Virginia Retirement System
Assistant Attorney General
State of Virginia
900 E. Main Street
Richmond, Virginia 23219
(804) 786-6055
Facsimile: (804) 786-0781
____________________________p.d.
Robert A. Dybing, Esquire
Attorney for William H. Leighty
Shuford, Rubin & Gibney, P.C.
P.O. Box 675
Suite 1250, Seven Hundred Building
Richmond, Virginia 23218
Office (804) 648-4442
Telefax (804) 648-4450
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November 30, 2013 Austin TX, Stephen N. Lisson, Stephen N. Lisson Austin TX, Steve Lisson, Steve Lisson Austin Texas Leave a comment
InsiderVC.com pierces the VC industry’s verbal fog – Steve Lisson, Austin Texas
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Sunday, December 28, 2014
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Tuesday, December 9, 2014
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Steve Lisson | Stephen Lisson | Stephen N. Lisson | Austin Texas
Transparency. Let’s have a round of applause for
CalPers, the giant state pension fund, for transparency. Beth Healy of
the Boston Globe (8/17/2001) reports Money managers aghast that
pension investor shows returns, rankings. It’s a report card that has
rocked the secretive venture capital world, and one that even the `A’
students didn’t care to see displayed on the refrigerator. Calpers, the
giant California pension fund that sets trends for many large investors,
has posted on its Web site the performance of every venture or buyout
fund in which it’s invested for the past decade. Firms typically guard
these numbers carefully, but the Calpers chart even says which funds are
meeting expectations, and which are disappointments. … The industry
buzz around the report stems from the secrecy with which venture firms
and buyout artists guard the specifics of their returns. Virtually every
firm claims ”top quartile” performance, and the numbers they give out
are suspect, venture analysts say. Steve Lisson of Austin, Texas, on his
controversial Web site, InsiderVC.com, tracks venture returns by doing
his own calculations on venture portfolios. He is the only independent
source on such numbers and has drawn fire from some venture capitalists
for breaking the code of silence. … over the long term, Calpers has been
doing something right. As of March 31, its average annual return for 10
years of private equity investing was 17.5%. The Wilshire 2500 Index, a
broad stock market benchmark, was up 13.9% in that period. Would that the federal government would do the same with alleged investment programs like SBIR.
Carl Nelson Consulting
http://www.carl-nelson.com/government2001.htm
Published by Carl Nelson Consulting, Inc, 1325 18th St NW, Washington DC 20036
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Saturday, November 22, 2014
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Stephen N. Lisson, Austin, Texas
What’s a VC to Do?
Forbes.com
What’s a VC to Do?
Shelley Pannill, Forbes ASAP, 09.10.01
Someone’s always looking for a bargain.
As thousands of new economy startups crashed and burned this past
year, speculation mounted that the venture capitalists they once
enriched were now cautiously sitting on pots of gold and playing golf.
But the VCs we talked to say it’s only the limited partners, the
investors behind the venture funds, who get to perfect their putts.
So what are these high-powered moneylenders up to now?
Damage control. VCs, like the rest of us, have lost a lot of money
lately. Some 25% are expected to go out of business over the next
several years. “Sometimes your widget doesn’t widge,” says Alan Salzman,
founding partner at VantagePoint Venture Partners. He should know. His
firm recently faced the grim task of writing severance checks after one
bankrupt portfolio company’s management team had squandered its money.
Then there’s the job of smoothing things out at companies that survived
but were merged, downsized, or acquired. Says Philip Gianos of InterWest
Partners: “I’m acting like a marriage counselor, which is a full-time
job right now.”
Scouring the ocean floor. Last year, says one observer, “You felt
lucky to be able to invest in a new technology startup.” This year, VCs
get to play God, waiting to invest until impoverished companies are
desperate for cash. “I’ve been out bargain shopping,” says Heidi Roizen
of Softbank Venture Partners, sipping chardonnay on a rolling lawn at
the Atherton, California, home of a fellow VC. “I can’t believe these
valuations!”
Revisiting old friendships. Last year’s “shootouts” for deals have
subsided. VCs are again finding synergies with competitors. “The
tourists are gone,” says Accel Partners über investor Jim Breyer,
alluding to the rush of cash-happy hobbyists–both individuals and
companies–combing the landscape for gold in recent years.
Business as usual. Sort of. VCs are doing what they do best:
investing in startups, although the pace has slowed. According to
research firm Venture Economics, VC investments have fallen by nearly
two-thirds, from $27.2 billion in Q2 last year to $10.6 billion in Q2
this year. Still, they’re actually spending more this year in some
sectors, such as wireless, biotechnology, fiber optics, and data
storage. E-commerce, of course, was the big loser, with VC investing
sinking from $210 million in the first quarter of last year to $3.3
million by the fourth quarter.
But venture capitalists had better keep investing, warns Steve
Lisson, who runs the popular InsiderVC.com. According to data tracker
VentureOne, 27 venture capital firms have completed raising funds of
more than $1 billion each since the start of the dot-com doldrums in
spring 2000. Says Lisson: “They’ve got to use it or lose it.”
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Friday, November 14, 2014
Stephen N. Lisson, Austin, Travis County, Texas, Steve Lisson, Austin, Travis County, Texas
Stephen Lisson, StephenNLisson, Stephen N. Lisson, Austin Texas, Austin TX
Financial Investors? Us?
InsiderVC.com pierces the VC industry’s verbal fog.
1 April 01 12:14, Tsafrir Bashan
Stephen N. Lisson, Austin, Travis County, Texas, Steve Lisson, Austin, Travis County, Texas
Anyone carefully following the venture capital industry in Israel and
overseas recognizes the routine. Managing partners talk at length and
with great passion, but with very little substance. They gossip
endlessly about the industry. What about the industry’s numbers? “We
don’t disclose private data,” is the stock reply from industry players.
Today, for example, everyone knows that the situation is bad, but it
is hard to say who exactly is in a bad position. You won’t find a fund
partner talking animatedly about a company shutting down or about a down
round. The most you can expect is an admission that not everything is
perfect.
The absence of data is both odd and entertaining, particularly for an
industry in which capital, finances, and yield are the key words.
Without figures on the amount of a company’s holdings or valuations, the
pompous phrase, “added value,” is all the venture capital industry has
left to talk about. It is difficult to find a financial industry at any
point in history that has provided so few figures. (Venture capital is a
professional investment industry, regardless of how many partners talk
about opening doors and assistance in recruiting executives).
Against this rather frustrating background, it is worth consulting
the US web site insiderVC.com. The site provides data for companies in
the industry, such as profit and loss allocations between the general
partner and the investors (the carry), the exact rate of management
fees, and exact investments and valuations for portfolio companies at
the various financing rounds. Of course, the site also includes
derivative data, such as the internal rate of return (IRR) and the
realization ratio. In other words, it provides the tools needed to
compare various organizations and even different funds within the same
organization, information you will not get from your local venture
capital management partner.
In order to gain access to all this data, you have to pay a
considerable fee, but you can get a preview of the statistics and a
sample of site editor Stephen Lisson’s sharp tongue free of charge. You
won’t find better material on the web.
Published by Israel’s Business Arena on March 29, 2001
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Posted by Steve Lisson Austin TX at 10:36 PM
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Posted by Steve Lisson Austin TX at 10:35 PM
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Saturday, October 11, 2014
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Saturday, September 13, 2014
- STEVE
LISSON, AUSTIN, TX, STEPHEN N. LISSON, TRAVIS COUNTY, TEXAS, LISSON
STEPHEN N., STEVE N. LISSON, INSIDER, VC, INSIDERVC, INSIDERVC.COM
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- Rumors of Benchmark’s Demise Greatly Exaggerated – Steve Lisson, Stephen N. Lisson, Austin, Travis County, Texas
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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.”
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Monday, August 18, 2014
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Wednesday, August 6, 2014
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November 30, 2013 Stephen N. Lisson Austin Texas, Stephen N. Lisson Austin TX, Steve Lisson Austin Texas, Steve Lisson Austin TX 1 Comment
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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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Posted by Stephen N. Lisson at 9:25 AM
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Friday, November 29, 2013
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What Goes Up:
After soaring, this year’s IPOs have returned to earth
By Jack Willoughby12/11/2000
Barron’s
Page 35
(Copyright (c) 2000, Dow Jones & Company, Inc.)
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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Posted by Stephen N. Lisson at 11:24 AM
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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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Posted by Stephen N. Lisson at 11:12 AM
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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, )
)
- ) Case No.: HQ-2029-4
)
VIRGINIA RETIREMENT SYSTEM )
)
and )
)
WILLIAM H. LEIGHTY, )
Respondents. )
ORDER
On the 30 th 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
P.O. Box 11787
Richmond, Virginia 23230
(804) 285-7000
Facsimile: (804) 285-2849
___________________________p.d.
Michael Jackson, Esquire
Attorney for Virginia Retirement System
Assistant Attorney General
State of Virginia
900 E. Main Street
Richmond, Virginia 23219
(804) 786-6055
Facsimile: (804) 786-0781
____________________________p.d.
Robert A. Dybing, Esquire
Attorney for William H. Leighty
Shuford, Rubin & Gibney, P.C.
P.O. Box 675
Suite 1250, Seven Hundred Building
Richmond, Virginia 23218
Office (804) 648-4442
Telefax (804) 648-4450
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Posted by Stephen N. Lisson at 10:45 AM
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