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.
I delivered the keynote on “A Changing World – Globalisation, Asia, India and China yesterday at ITARC in London. (where I had spoken last year too). Below is an abridged set of slides that formed the backdrop to my talk (minus the images).
Comments, thoughts welcome as always.
…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.
First the great piece of news: Elements Akademia got included in Gen Next India’s Hottest Start-ups (just 16 companies!):
…and here is the article (strong words but very thought-provoking): How I Judge Investors.
Presented some slides on building teams to a room-full of very keen and enthusiastic audience at the TiE Institute session last week at London Business School on “Leading High Performance Teams“..
I tremendously enjoyed Adam’s slides and his exercises…Will share my own slides on this post later…