The Kauffman Foundation, which has ties to the venture industry, has issued a damning study of the business that addresses long-running concerns about poor performance..
…Looking into its portfolio of nearly 100 VC funds, including what it says are some of the most notable and exclusive names (confidentiality agreements barred it from naming them), the foundation found that only 20 of them beat a public-market equivalent by more than 3% annually, and half of those started investing before 1995.
…The report also offers support for the belief that small venture funds are the most successful. Only four of 30 VC funds in the foundation’s portfolio with more than $400 million in committed capital produced returns better than those from a publicly traded small-cap stock index fund.
…The foundation promises to take its own medicine. It said it will invest in venture funds of less than $400 million whose partners have consistently shown they can outperform public markets and who commit at least 5% of the fund’s capital. It also plans to do more direct investing to avoid paying management fees and sharing profits with VCs. And, it plans to shift money from venture capital to the public markets.
…using the math I laid out yesterday (roughly 1,000 startups funded each year by VCs), this means that on average between 1% and 3% of venture funded startups get to an IPO.
To recap, 1-3% get to an IPO and 5-10% get to an M&A exit over $100mm. So 85-95% of all venture backed startups will either fail or exit below $100mm.
…in which I break my self-imposed period of silence. I have a very good reason. I am very pleased and excited to now be formally involved in an extraordinary enterprise in India: Vindhya. Vindhya is extraordinary because:
…almost 95% of its staff of 200 youngsters comprises differently-abled and physically challenged youngsters
Read more about them in this post on my personal blog...and wish us luck in our bold plans for the future.
Chanced upon this great post by Matt Blumberg on “10 Characteristics of Great Investors“.
Should be read by ALL investors, I think.
I am listing my favourite five of the ten characteristics below:
- Great investors know how to give strategic advice without being in the operating weeds of a company
- Great investors get to know whole management teams, not just CEOs
- Great investors invite you to do diligence on them by giving you a list of every CEO they’ve ever worked with and asking you to pick the ones you want to talk to
- Great investors ask great questions
- Great investors don’t publicly take credit for the success of their investments, even if they were major drivers of that success
Just back from an exhausting and intense 10-day visit to India, part of which was taken up by the Capvent VC/PE Conference in Goa.
I shared a panel on “New Media” with Rajesh Sawhney of Reliance Entertainment and Harel Beit-On of Viola Private Equity…and talked briefly about Enqii and an Indian start-up that I am very enthused about (it takes Out-of-Home advertising to a new level – leveraging the ubiquitous cycle rickshaws that you see across large parts of India – more on them later)
Interesting conversations on the sidelines and during the panels…but the “chill” in Private Equity was unmistakable – even as Goa seared at 33 degrees…
India seems to be holding up better though…and the sentiment is mildly optimistic…not least because of a rebounding stock market that has jumped 40% in the last three months - as it recovers from its multi-year lows.
I also concluded my latest personal investment – in an Indian start-up which I believe is very attractively positioned in the education sector in India. It is called Elements Akademia…Check them out.
Somewhat related posts:
I was here…talking to a bunch of bright people and listening to some great ideas…
Could anything have been more exciting?!