...how quickly venture backed
technology companies market capitalization changed (grew) and whether there had
been a change in the “Time To Market Cap” during different periods of history. November 2014
0507 057 01 98 * Adana Klima Montaj Servisleri, Adana Klima Montaj Servisi, Adana Klima Montaj Servisleri, Arçelik Klima Montaj Servisi Adana, Beko Klima Montaj Servisi Adana, Demirdöküm Klima Montaj Servisi Adana, Vestel Klima Montaj Servisi Adana, Aeg Klima Montaj Servisi Adana, Bosch Klima Montaj Servisi Adana, Ariston Klima Montaj Servisi Adana, Samsung Klima Montaj Servisi Adana, Siemens Klima Montaj Servisi Adana, Profilo Klima Montaj Servisi Adana, Fujitsu Klima Montaj Servisi Adana, Baymak Klima Montaj Servisi Adana, Sharp Klima Montaj Servisi Adana, Mitsubishi Klima Montaj Servisi Adana, Alaska Klima Montaj Servisi Adana, Aura Klima Montaj Servisi Adana, Adana Çukurova Klima Montaj Servisleri, Adana Yüreğir Klima Montaj Servisleri
...how quickly venture backed
technology companies market capitalization changed (grew) and whether there had
been a change in the “Time To Market Cap” during different periods of history. November 2014
0507 057 01 98 * Adana Klima Montaj Servisleri, Adana Klima Montaj Servisi, Adana Klima Montaj Servisleri, Arçelik Klima Montaj Servisi Adana, Beko Klima Montaj Servisi Adana, Demirdöküm Klima Montaj Servisi Adana, Vestel Klima Montaj Servisi Adana, Aeg Klima Montaj Servisi Adana, Bosch Klima Montaj Servisi Adana, Ariston Klima Montaj Servisi Adana, Samsung Klima Montaj Servisi Adana, Siemens Klima Montaj Servisi Adana, Profilo Klima Montaj Servisi Adana, Fujitsu Klima Montaj Servisi Adana, Baymak Klima Montaj Servisi Adana, Sharp Klima Montaj Servisi Adana, Mitsubishi Klima Montaj Servisi Adana, Alaska Klima Montaj Servisi Adana, Aura Klima Montaj Servisi Adana, Adana Çukurova Klima Montaj Servisleri, Adana Yüreğir Klima Montaj Servisleri
Details the rise, fall and rise of the venture capital industry in the USA, the consequent implications on the environment Asia finds itself in, with the opportunity presenting itself.
The latest collection of things we (Atomico) found interesting and important in tech and VC land, but that didn’t necessarily get the attention they deserve. We think of them as our hidden little gems. We’ll add to the collection over time, so bookmark the page and keep coming back for updates or to dig into the archive.
The seed stage of the venture capital industry went through a boom cycle from 2006-2014 but has lately seen a sharp decline. What's happening? Is it temporary or are their structural problems? This deck answers that question.
A look at the Venture Capital industry heading into 2020. Some have questioned whether the industry has a future. This deck does a detailed look at where the industry is and why the future of VC still looks bright.
10 trends that are shaping the world of mobile gamingPocket Gamer Biz
At Pocket Gamer Connects Helsinki 2014, Will Freeman gave us his 10 trends that are shaking up the world of mobile gaming.
1. PUBLISHING IS DEAD. LONG LIVE PUBLISHING SERVICES
2. YOU SHOULD GO TO FINLAND
3. THE RETURN OF PREMIUM?
4. ASIAN M&As ARE CONTINUING TO RESHAPE THE GLOBAL POWER BALANCE
5. THE FUTURE OF DISCOVERABILITY
6. BRAZIL’S CONTINUED RISE
7. IS PC STEALING MOBILE’S GRASS ROOTS STUDIOS?
8. HAS CROWDFUNDING LOST ITS WAY?
9. IPOS: ON THE RISE OR FAILING DISMALLY?
10. COULD BRAND MARKETING BE BACK?
Fundstrat Bitcoin & Blockchain presentation for Upfront SummitMark Suster
An equity analyst case for the value in cryptocurrencies. Thomas Lee of Fundstrat was lead equity researcher for JP Morgan before founding Fundstrat. He takes a market approach to valuing Bitcoin and other cryptocurrencies. Here is his presentation for the #UpfrontSummit 2018.
Details the rise, fall and rise of the venture capital industry in the USA, the consequent implications on the environment Asia finds itself in, with the opportunity presenting itself.
The latest collection of things we (Atomico) found interesting and important in tech and VC land, but that didn’t necessarily get the attention they deserve. We think of them as our hidden little gems. We’ll add to the collection over time, so bookmark the page and keep coming back for updates or to dig into the archive.
The seed stage of the venture capital industry went through a boom cycle from 2006-2014 but has lately seen a sharp decline. What's happening? Is it temporary or are their structural problems? This deck answers that question.
A look at the Venture Capital industry heading into 2020. Some have questioned whether the industry has a future. This deck does a detailed look at where the industry is and why the future of VC still looks bright.
10 trends that are shaping the world of mobile gamingPocket Gamer Biz
At Pocket Gamer Connects Helsinki 2014, Will Freeman gave us his 10 trends that are shaking up the world of mobile gaming.
1. PUBLISHING IS DEAD. LONG LIVE PUBLISHING SERVICES
2. YOU SHOULD GO TO FINLAND
3. THE RETURN OF PREMIUM?
4. ASIAN M&As ARE CONTINUING TO RESHAPE THE GLOBAL POWER BALANCE
5. THE FUTURE OF DISCOVERABILITY
6. BRAZIL’S CONTINUED RISE
7. IS PC STEALING MOBILE’S GRASS ROOTS STUDIOS?
8. HAS CROWDFUNDING LOST ITS WAY?
9. IPOS: ON THE RISE OR FAILING DISMALLY?
10. COULD BRAND MARKETING BE BACK?
Fundstrat Bitcoin & Blockchain presentation for Upfront SummitMark Suster
An equity analyst case for the value in cryptocurrencies. Thomas Lee of Fundstrat was lead equity researcher for JP Morgan before founding Fundstrat. He takes a market approach to valuing Bitcoin and other cryptocurrencies. Here is his presentation for the #UpfrontSummit 2018.
Buying in Today's Market / Short Sale FactsTom Blefko
Does the typical first-time homebuyer in today's market really understand what type of market we're in? Here is a different way to show this segment of the market that NOW is the right time to buy.
Short sale facts and figures are reviewed in addition to a brief overview of the government's latest endeavor to streamline the short sale process.
Miscellaneous items:
- Title insurance rates are changing in Pennsylvania. Get the facts.
- The latest Prudential Homesale commercial is presented.
- Changes reviewed in the new PAR agreements for Vacant Land and New Construction.
- Market statistics for Central PA for the month of April 2012.
Глобальная политика XXI века — Кадры решают всё!Ян Юшин
25 декабря 2013 года представители организации «Новая Молодёжная Политика» из России, Беларуси и Приднестровья провели в Приднестровском государственном университете конференцию на тему «Глобальная политика XXI века — Кадры решают всё!».
Real estate agents need to build and nurture their database to grow their business. This presentation will not only show you that it is the #1 source of business for agents, but also show you the steps to take to tap into this valuable resource.
Journal of Applied Corporate Finance • Volume 22 Number 2 A Mo.docxpriestmanmable
Journal of Applied Corporate Finance • Volume 22 Number 2 A Morgan Stanley Publication • Spring 2010 1
It Ain’t Broke: The Past, Present, and Future of Venture Capital
BT
by Steven N. Kaplan, University of Chicago Booth School of Business
and NBER, and Josh Lerner, Harvard Business School and NBER*
he U.S. venture capital (VC) industry is currently
subject to a great deal of uncertainty and contro-
versy. Some observers and practitioners believe
that the VC model is broken and that the U.S.
VC industry needs to shrink.1 In this paper, we put the U.S.
VC industry into its historical context, assess the current state
of the VC market, and discuss the implications of that history
and the current conditions for the future.
We begin by describing the fundamental problem that
entrepreneurs face and VCs need to solve in order to invest
successfully. There is a great deal of evidence to support what
is now a highly developed theory of how the U.S. VC model
provides an efficient solution to this basic problem of entre-
preneurial finance. And there is little doubt that the U.S.
venture capital industry has been very successful. A large
fraction of IPOs, including many that are now among the
most successful public companies in the world, have been
funded by VCs. And, where possible, the U.S. VC model has
been copied around the world.
Next we look at the historical patterns of commitments
to U.S. VC funds and investments in companies by those
funds. U.S. VC investments in companies have represented
a remarkably constant 0.15% of the total value of the stock
market over the past three decades—the period for which we
have reliable data. Commitments to VC funds, while more
variable, have been consistently in the 0.10% to 0.20% range.
These percentages have not changed in recent years.
Third, we consider the historical record on VC fund returns,
paying particular attention to returns of post-2000 “vintages.”
Contrary to the popular impression, we do not find that returns
to VC funds this decade have been unusually low (or high)
relative to the overall stock market. This is true despite the
relatively low number of IPOs. Overall, VC investment and
returns have been subject to boom-and-bust cycles over time.
Based on our historical analyses, we make some observa-
tions about the current situation and consider what is likely to
happen going forward. The level of commitments to and the
investment pace of VC funds since 2002 have been consistent
with the long-term historic averages. At the same time, the
returns relative to the overall stock market appear to have
been roughly average. This does not suggest to us that there
is too much money in U.S. VC, or that the VC model is
broken. Instead it appears to reflect the natural evolution of
a relatively competitive market.
In fact, given the unusual and unexplained paucity of IPOs
between 2004 and 2007, we argue there is more upside than
downside for the VC vint ...
C
A
SP
A
R
B
EN
SO
N
/G
ET
TY
IM
A
G
ES
STRATEGY
IN THE AGE OF
SUPERABUNDANT
CAPITAL
MONEY IS NO LONGER A SCARCE RESOURCE.
THAT CHANGES EVERYTHING.
BY MICHAEL MANKINS, KAREN HARRIS,
AND DAVID HARDING
66 HARVARD BUSINESS REVIEW MARCH–APRIL 2017
most of the past 50 years, business leaders viewed fi-
nancial capital as their most precious resource. They
worked hard to ensure that every penny went to fund-
ing only the most promising projects. A generation
of executives was taught to apply hurdle rates that
reflected the high capital costs prevalent for most
of the 1980s and 1990s. And companies like General
Electric and Berkshire Hathaway were lauded for the
discipline with which they invested.
Today financial capital is no longer a scarce
resource—it is abundant and cheap. Bain’s Macro
Trends Group estimates that global financial capital
has more than tripled over the past three decades and
now stands at roughly 10 times global GDP. As capital
has grown more plentiful, its price has plummeted.
For many large companies, the after-tax cost of bor-
rowing is close to the rate of inflation, meaning that
real borrowing costs hover near zero. Any reasonably
profitable large enterprise can readily obtain the capi-
tal it needs to buy new equipment, fund new product
development, enter new markets, and even acquire
new businesses. To be sure, leadership teams still need
to manage their money carefully—after all, waste is
waste. But the skillful allocation of financial capital is
no longer a source of sustained competitive advantage.
The assets that are in short supply at most compa-
nies are the skills and capabilities required to translate
good growth ideas into successful new products, ser-
vices, and businesses—and the traditional financially
driven approach to strategic investment has only com-
pounded this paucity. Indeed, the standard method
for prioritizing strategic investments strives to limit
the field of potential projects and encourages compa-
nies to invest in a few “sure bets” that clear high hur-
dle rates. At a time when most companies are desper-
ate for growth, this approach unnecessarily forecloses
too many options. And it encourages executives to
remain committed to investments long after it’s clear
that they’re not paying off. Finally, it leaves companies
with piles of cash for which executives often find no
better use than to buy back stock.
Strategy in the new age of capital superabundance
demands a fundamentally different approach from the
traditional models anchored in long-term planning
and continual improvement. Companies must lower
hurdle rates and relax the other constraints that reflect
a bygone era of scarce capital. They should move away
from making a few big bets over the course of many
years and start making numerous small and varied
investments, knowing that not all will pan out. They
must learn to quickly spot—and get out of—losing
ventures, while ag ...
Enterprise growth during turbulent timesIliya Rybchin
Corporate Venture Capital offers the most direct path to strategic and financial rewards from new business models, emerging technologies and disruptive innovation.
The COVID-19 crisis has driven the world toward global financial turmoil — forcing CEOs and CFOs to urgently address the immediate financial challenges resulting from this pandemic.
However, forward-looking CEOs and CFOs should use this opportunity to make critical investments through corporate venture capital (CVC) to set up their companies for long-term success and secure their company’s future.
The PEO Industry in Transition, by Benjamin Gordon, BGSA CEOBenjamin Gordon
Benjamin Gordon and BGSA write about how the professional employer organization (PEO) industry is evolving. Benjamin outlines mergers, acquisitions, investments, transactions, and strategic change underway in the PEO sector.
So how do you value the share price of stock for a given company? In other words, what is the intrinsic value of a given stock? Generally speaking, a stock is valued based on the company’s current financial state and what the market believes the company’s future financial state will look like. https://carnick.com/
DealMarket Digest Issue137 - 17 April 2014Urs Haeusler
SEE WHATS NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 137 - April 17th, 2014:
- Cravings for Direct Co-Investment Still Strong
- Narrow Niches and Big Returns
- Australian PE Backed IPOs Outperform
- The Traits of Family Wealth Managers That Make Money…. and Lose it
- CEOs Get M&A Fever Again
- Quote of the Week: Betting on Justice
Marlow Felton, Chris Felton • Transamerica Financial Advisors Inc.
- A Millennial’s perspective: How we really feel about money and investing by Nick Halle
- The continuous bid under the market
- The force of Supply at major tops in the U.S. equity market by Tracy L. Knudsen, CMT
- Working a structured referral process (Don Meredith, Lincoln Financial Advisors Corp.)
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
How Does CRISIL Evaluate Lenders in India for Credit RatingsShaheen Kumar
CRISIL evaluates lenders in India by analyzing financial performance, loan portfolio quality, risk management practices, capital adequacy, market position, and adherence to regulatory requirements. This comprehensive assessment ensures a thorough evaluation of creditworthiness and financial strength. Each criterion is meticulously examined to provide credible and reliable ratings.
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
3. RIGHT-SIZING THE
U.S. VENTURE CAPITAL INDUSTRY
INTRODUCTION
The U.S. venture capital industry is at an inflection point. It has had many
successes over the last three decades, and is prominent worldwide for its role in
financially catalyzing notable, high-growth companies. More recently, however,
venture capital returns have stagnated and declined, with the industry having
seen little recovery since its go-go days of the late 1990s.
There is a growing and important debate about where the venture industry goes
from here. No one is seriously arguing that the venture capital industry will cease
being crucial in driving the growth of important companies in information
technology, clean technology, and biotech, all of which are risky and, to a greater
or lesser degree, capital-intensive. But there is ample reason to believe that the
venture industry, at least in the United States, will be differently sized and
structured in the future.
This change will not come easily. Many venture industry participants are
comfortable with their industry’s size, structure, and compensation model, which
is tied to assets under management and can be highly remunerative. At the same
time, the industry has become conflated with entrepreneurship in the popular
imagination as well as in policy circles, with the result being a widespread and
incorrect belief that venture capital is a necessary and sufficient condition in
driving growth entrepreneurship. The result is strong resistance to change, as
well as much support for the venture industry in its current form.
This short paper considers one aspect of the future of the venture capital
industry, its size. How big should it be in terms of the aggregate underlying
financial commitment to venture partnerships? Does it need to be larger to better
equip entrepreneurs to solve the important problems we as a society face?
Should it be smaller to take more risks, drive higher returns, and thus keep
investors satisfied? How should we think about the role of venture capital in the
future?
RIGHT-SIZING THE U.S. VENTURE CAPITAL INDUSTRY 1
4. ROLE OF VENTURE CAPITAL
There is no denying the importance of the venture capital industry. Despite being
relatively young, having only reached its modern form in the last thirty years, this
business of investing risk capital in growth companies has had many major
successes. Some of the best known and most successful growth companies and
brands in the world are venture-backed, including Apple, Google, Genentech,
Home Depot, Microsoft, Starbucks, Cisco, and many others. The National
Venture Capital Association, the industry’s main lobbyist, claims a study it
sponsored shows that venture-backed companies from 1970–2005 accounted for
10 million jobs and $2.1 trillion in revenues by 2005, as well as representing 17
percent of U.S. gross domestic product (GDP).
These are impressive numbers. But noting that venture capital played a role in
the early days of these storied companies is not the same as saying the venture
industry deserves full credit for these companies any more than does, say,
Pacific Gas & Electric, which provides electrical power to Bay Area homes and
businesses. Merely being the provider of a service to a company is separate from
having demonstrated that the company could not have obtained that service
elsewhere. There are many providers of risk capital, ranging from banks to
angels, and a smaller venture industry (or a larger one) might well have had as
much success, or more, at funding the same companies.
Of course, we cannot conduct a randomized experiment to disentangle venture
capital from the resulting companies and their eventual success or failure. We do
know some things, however. For example, we know that only a tiny percentage
(approximately 0.2 percent) of the estimated 600,000 new businesses created in
the United States each year obtain venture capital financing1. That figure has not
changed materially in recent years, and likely never will. Most of the companies
created in the United States in any given year are sole proprietorships and
service companies, less capital-intensive companies that almost never seek or
obtain venture financing.
Growth companies typically require more capital than sole proprietorships and
service companies, and thus are the main focus of the venture capital industry.
Such companies, however, represent only a subset of startups. Even among that
latter group of companies, however, venture capital’s presence is far from
widespread. We recently studied the prevalence of venture capital financing
among companies on the Inc. 500 list of the fastest-growing private companies in
the United States. Looking across ten years of that list—roughly 900 unique
companies from 1997–2007—we found that approximately 16 percent of the
companies had venture capital backing. In other words, even among the fastest-
growing and most successful companies in the U.S., less than one-in-five
1
See Kauffman Index of Entrepreneurial Activity, 1996-2008
(http://www.kauffman.org/uploadedFiles/kiea_042709.pdf); PWC MoneyTree
(http://www.pwcmoneytree.com).
RIGHT-SIZING THE U.S. VENTURE CAPITAL INDUSTRY 2
5. companies had venture investors. Such companies almost certainly could have
venture investors, if they wanted them, so the absence of venture capital should
generally be read as a sign that these growth companies saw no need to take
external capital from venture capitalists, whatever the merits of such capital
might be.
This should not take away from venture capital’s role in financing growth
companies. External capital is sometimes required by some private companies in
their early stages, and it is good that there is a class of professional investors
with enough financial resources to provide that assistance when it is needed.
However, venture capital and entrepreneurship are separate phenomena, even
among growth companies, and conflating the two, let alone implying that the
former causes the latter, is untrue and unhelpful.
VENTURE CAPITAL INDUSTRY PERFORMANCE
Where does the venture industry go from here? There are many opportunities for
entrepreneurs ahead of us, and thus, potentially, for venture capitalists. The
specific areas are wide, ranging across disease treatment and drug delivery, to
clean technology, to mobile technologies. All of these areas will undoubtedly
produce large and successful companies in the coming years, some of which will
almost certainly be backed by venture capitalists.
To fund entrepreneurs on a wide scale and indirectly do societal good, the
venture industry must be viable—it must offer its investors competitive returns. At
present, it is increasingly uncertain whether the U.S. venture industry can and will
do that. Given the multi-year duration of institutional venture funds, the correct
performance metric is a longitudinal one that matches the typical lifespan of such
funds. The following table, Figure 1, shows venture industry performance over
one-, five-, and ten-year periods as compared to various public market indices
over the same periods. The latter two timeframes are the most appropriate ones
given the lengthy average lifetime of a venture fund. Further, while many persist
Figure 1
Venture Capital Performance
Venture
Period* Russell 2000 S&P 500 NASDAQ
Capital
1-year -17% -35% -38% -41%
5-year -2% -10% -19% -21%
10-year 8% 18% -27% -28%
Source: Cambridge
in comparing venture performance to the S&P 500, which is an index of large-
capitalization publicly traded stocks, the small-cap Russell 2000 Index is a better
RIGHT-SIZING THE U.S. VENTURE CAPITAL INDUSTRY 3
6. comparison. The venture industry leads the Russell 2000 slightly on a five-year
investing horizon, but lags the Russell 2000 by 10 percent on a ten-year
timeframe.
Note that this ten-year figure includes the dot-com period, thus materially inflating
the venture industry’s performance. The combined value of venture-backed
public offerings in 1999 and 2000 was more than the aggregate value in all other
years between 1994 and 2008 inclusive. Other adjustments should be made to
venture performance for its illiquidity and long hold times. With funds lasting ten
years and more, venture investors typically require much higher performance
than in public markets to compensate for the lockup and the absence of a
secondary market. Further, equity markets were badly depressed by the 2008
declines. If we were to take markets closer to today, June 2009, we would see
that the venture industry’s lead over the larger-cap indices would become
marginal. Putting all of these together—the illiquidity, hold time, dot-com period,
and 12/31/08 end date—it becomes obvious that venture does not offer the
requisite performance differential over public markets across any relevant time
horizon. The industry’s current returns are, in short, unsatisfactory both in a
relative and absolute sense.
Venture capital’s performance deterioration is a relatively recent phenomenon. In
2003, the five-year trailing performance of the venture industry was more than 20
percent2, and it had never been negative back to 1990. That changed, however,
in 2004, as the dot-com collapse caused five-year venture capital performance
to dip below zero, touching -2.4 percent and -6.7 percent in 2004 and 2005
respectively. Performance has been slightly on either side of the zero line
ever since.
Why the change? There are at least three possible reasons, all interrelated.
There could be too much capital allocated to venture, the effect being higher
valuations and lower exit multiples. The second explanation might be shrinking
exit markets, with, for example, the decline in IPOs preventing venture investors
from earning the same returns as they have historically. Finally, it is possible that
the venture business itself might be structurally flawed, with the core markets that
made it successful—information technology and telecommunications—now
mature and delivering sub-standard returns, while new venture-ready markets
have not emerged.
To turn to the last hypothesized cause of poor returns first, there should be little
question that information technology is a much-matured sector from what it was
two decades ago. While the Internet has provided many investment possibilities,
including some resounding success for venture capitalists, like Google, the
sector has changed. The computer and enterprise software and networking
markets are long past the peak of innovation in terms of being places for
profitably investing significant early-stage money. At the same time, most
2
National Venture Capital Association Yearbook, 2008 edition.
RIGHT-SIZING THE U.S. VENTURE CAPITAL INDUSTRY 4
7. information technology entrepreneurs say today that it costs a fraction of what it
did a decade ago to start a company. (Much of the technology is open source,
and the cost of networking connection and bandwidth has plummeted, as has the
cost of marketing and distribution over the Internet.) Despite costs falling by half
or more, technology-related venture capital investing still accounted for more
than half of all investments (by dollar value) in the United States in 2008. Were
the sector to decline to a level commensurate with shrinking capital requirements
and opportunities, we would already see a healthier and smaller venture capital
sector.
Figure 2
Venture Capital Investing, by Sector: 1995–2008
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
IT Healthcare Energy Retail Other
Source: PricewaterhouseCoopers/National Venture Capital Association Moneytree™ Report. Data: Thomson
Reuters.
Some have argued that the cause of poor returns, post-Sarbanes-Oxley, is that
the IPO window never reopened for early-stage companies, largely eliminating
the primary source of profitable exits for venture investors. There is no question
that the number of venture-backed IPOs has declined, with the average per year
from 2004–2008 (thirty-three) a little more than half of the pre-bubble number
(fifty)3, but, with the exception of 2008, it did not decline to levels completely out
of line with what we saw before the dot-com period. Companies did successfully
come public over the last decade, including in technology, but what has changed
is that the market has become less accepting of young, money-losing companies
than it briefly was in the late 1990s. There is no reason to expect that to change,
3
Thomson-Reuters data.
RIGHT-SIZING THE U.S. VENTURE CAPITAL INDUSTRY 5
8. just as there is no reason to believe that if a profitable technology company with
material revenues filed to go public it wouldn’t receive a positive reception. It is a
mistake to say that the problem is the exit market—it would be more correct to
say there is a problem with what venture investors once were able to bring to
market, but no longer can.
With its core investing area maturing and becoming less capital intensive, and
with exit markets less willing to take on young and unprofitable companies, it
becomes clear that the real question for venture is one of capital. It needs to
adjust for the shrinking size of the opportunities in markets that offer venture-
ready characteristics. The following two figures show the relationship between
venture capital commitments and returns. Figure 3 shows how the rapid
expansion in venture capital commitments between 1998 and 2001 helped
presage the asset class’s decline, and was almost certainly causal, as has
already been discussed. A five-fold increase in venture capital commitments by
limited partners led to a collapse in performance from which the sector has never
recovered.
Figure 3
Venture Capital Performance vs Committed Capital: 1990–2008
60% 300
50% 250
Committed Capital ($B)
40% 200
Five-year performance
30% 150
20% 100
10% 50
0% 0
-10% -50
Source: National Venture Capital Association Yearbook 2009.
Figure 3. Source:
The situation is similar if you consider the pace at which venture capitalists
continue to invest, despite poor recent returns. As Figure 4 shows, venture
capitalists are investing at a pace commensurate with what we saw in 1998-
1999, on the order of $30 billion a year, much higher than relative ―normalcy‖ i.e.,
the $5 billion-$10 billion a year pace that we saw pre-bubble in 1995 and earlier.
While some might argue that opportunities for venture investing have expanded,
with large capital requirements in clean technology and biotechnology, thus
justifying the additional capital, the data shows that the expansion in venture has
not coincided with improved returns. A more credible case can be made for
RIGHT-SIZING THE U.S. VENTURE CAPITAL INDUSTRY 6
9. inertia playing a large role in current venture capital allocations, with too many
venture partnerships continuing to invest in information technology because they
always have, not because they credibly anticipate improved returns.
Figure 4
Venture Capital Performance vs Investments: 1990–2008
60% 120
50% 100
Investments ($B)
40% 80
Five-year performance
30% 60
20% 40
10% 20
0% 0
-10% -20
Source: National Venture Capital Association Yearbook 2009.
RIGHT-SIZING VENTURE CAPITAL
Given the opportunities it faces and the returns it has generated, we should
expect limited partners to shrink their allocation to the asset class in the coming
years. This will help resuscitate the sector by lowering valuations and improving
overall exit multiples. But how much smaller should we expect the sector to
become in terms of capital committed and investing pace?
We have already touched on at least two ways of approaching this question. If
we are to return to a level on par with what we saw when the sector last
generated competitive returns, we should expect it to fall by half to a $12 billion
per year investing pace from its current $25 billion (and higher) rate. This would
imply committed venture capital assets under management falling by half as well,
to perhaps $100 billion or lower.
Another way of approaching right-sizing venture capital is normalizing investing
pace against the size of the U.S. economy. As a percentage of GDP for most of
the 1980s, investing was under 0.1 percent of GDP, falling as low as 0.04
percent by 1991, before rising above 0.1 percent in 1995. The pace of venture
investing subsequently climbed to its all-time maximum of 1.1 percent of U.S.
GDP by 2000. The measure fell in the post-boom period to 0.16 percent, and has
since increased slightly to 0.19 percent, still putting it considerably above the
RIGHT-SIZING THE U.S. VENTURE CAPITAL INDUSTRY 7
10. levels of 1980s, and on par with what we saw in the late 1990s. Again, this
implies we should see the pace of investing shrink further, perhaps by as much
as half from current levels, if the sector is to again produce competitive returns.
CONCLUSIONS
Whether it realizes it or wants to, the venture industry has to change. There is
immense interest in its capacity to catalyze economic change in a rapidly
restructuring economy, and limited partners continue to make commitments to
the asset class. At the same time, politicians have expressed interest in
supporting the sector, driving to make investments in strategic technologies,
especially in clean technology. But venture capital returns have deteriorated
immensely, predating the current economic downturn and traceable to the rapid
expansion in venture capital assets under management in the United States in
the late 1990s, a figure that has fallen less speedily than one would expect, in
part because of the long duration of funds and the general illiquidity of venture
capital investments.
It seems inevitable that venture capital must shrink considerably. While there is
no question that venture capital can facilitate some forms of high-growth
entrepreneurial firms, its poor returns make the asset class uncompetitive and at
risk of very large declines in capital commitments as investors flee this
underperforming asset. While any estimate is subject to much uncertainty, it
seems reasonable—based on returns, GDP, and exits—to expect the pace of
investing to shrink by half in the coming years. We should also expect a
continuing sharp decline in the amount of money invested in information
technology, a maturing sector with declining capital requirements in its remaining
innovative segments. Capital will continue to grow in other areas, including clean
technology, but the sector must shrink its way back to health if venture capital is
to provide competitive returns and secure its own future as a credible asset class
and economic force.
RIGHT-SIZING THE U.S. VENTURE CAPITAL INDUSTRY 8