About the VC industry

VC Research

VC funding for web reaches 10 year high — Tech News and Analysis Venture capital investments continued to grow at a rapid clip in the second quarter of 2011, with VC firms investing $7.5 billion across 966 deals, according to the latest MoneyTree report from PricewaterhouseCoopers (PwC) and the National Venture Capital Association (NVCA.) But some industry experts are saying that the current level of VC activity could be too good to be sustained. The second quarter of 2011 saw the highest total amount of money invested by VCs since the second quarter of 2008, according to the MoneyTree report released this week. Quarterly venture capital investment activity increased 19 percent during Q2 compared to the first quarter of 2011 , during which VCs invested $6.3 billion in 814 deals (click on image to expand):

Angel / VC Funding in A Frothy Market | Both Sides of the Table Adeo asked me to speak about fund raising. I generally don’t like to speak about fund raising in a frothy market. If you’re bullish you seem like a Cramer-esque cheerleader and if you’re bearish you sound like a party pooper. But Adeo asked so I obliged. I don’t know whether they shot video.

A VC: There Aren't Many Exits Over $100mm At at time when the average Series A round is now north of $20mm (based on very anecdotal evidence and not at all scientific), this poses challenges for the VC industry. The real math is a lot more complicated because of follow on rounds and such, but in order to keep this simple, let's assume all Series A deals are done at $20mm post-money and 5% of them end up exiting for north of $100mm. And let's assume that the average valuation of the exits north of $100mm is $250mm (I think that's a good guess but it could be off). That means you don't get your money back on your entire 20 investments with the one that has a good exit. The simple math is 20x20=400 which is greater than 250. And somewhere around 50 and 100 of them exit for more than $100mm every year.

chris dixon's blog / Allocation investing and the social premium For example, in the 80s and 90s venture capital was deemed to be a successful, independent asset class. As a result, many funds decided to allocate some portion of their capital to VC. These pools of capital were so large that they caused the VC industry to grow orders of magnitude larger – many say larger than it should be . In turn, this led to many bad venture investments that drove down returns in the industry (these problems were further exacerbated by the fee structure of VC that encouraged funds to get large and rapidly “put money to work”).

Web IPO Boom Splits VC Haves From Have-Nots - Bloomberg LinkedIn Corp. and Groupon Inc. are leading a surge in Web-company initial share sales that underscores a deepening chasm between the venture-capital industry’s haves and have-nots. LinkedIn Corp. and Groupon Inc. are leading a surge in Web-company initial share sales that underscores a deepening chasm between the venture-capital industry’s haves and have-nots. Photographer: Joseph Valenti/Bloomberg Enlarge image

Venture Capital

3. Limited partners, who generally look retrospectively to determine their portfolio allocations, not progressively, have shunned the asset class. 4. Quigley Report: A Venture Capital Revival is Upon Us | The Quigley Report

The Venture Capital Revival That's the argument being made by Clearstone Venture Partner 's Managing Director William Quigley. His 50-page report, released today, chronicles the changes to venture capital over the past decade and ends, not with an assessment about the end of VC but rather the possibilities for a stronger future. There have been a number of narratives in circulation over the last year or so: the " we're in a tech bubble " (or "we're not in a tech bubble") narrative, the "venture capital is in decline" narrative (or " venture capital is broken "). So here's a new one to add to the mix: we're in a "venture capital revival." The report identifies several factors that make conditions better today than for investors than they have been in over a deade.

VC legends

VC’s grill entrepreneurs all the time about how they will win vs. their competitors. What’s your “secret sauce”? How do you have an “unfair advantage”? How do you “get to first base” in light of many other competitors? What entrepreneurs probably don’t think about is that VC’s face the exact same questions from their own investors. not_available

Why Venture Capital Returns Are Going Up - Venture Capital Dispatch - WSJ This conclusion seems contrary to a number of recent articles. Fred Wilson has written a great post about bubble valuations and how his firm is thinking about it. There is widespread talk about a “super angel” bubble and more broadly, a Web 2.0 bubble.

Sean Parker, the entrepreneur behind Napster and Facebook now turned investor, was talking about the state of the venture capital industry last week over coffee. At 30, Mr. Parker, who was recently portrayed by Justin Timberlake in “The Social Network,” has been thinking a lot about innovation — or the lack of it — in the United States. And he’s come to a depressing conclusion about the money industry that he says used to be “the engine of innovation” for this country. Sean Parker of Napster Sees Gloom in Venture Capital - NYTimes.com

As the Startup Funding Model Evolves, Angels are Winning: Tech News « In the race to attract attention from startups and entrepreneurs, angel investors appear to be winning, and that’s accelerating an ongoing shift in the venture capital market — what some would argue is an evolution of the startup-funding model. A new survey from Dorsey & Whitney (PDF), a Silicon Valley law firm that specializes in advising startups, shows that startups are increasingly turning to angels, not just for their initial rounds of funding but for subsequent rounds as well. Meanwhile, the most recent data on the VC industry shows that traditional venture funds have only raised $9 billion so far this year, a significant drop from the amount raised in previous years. Insiders have been arguing for some time that the VC business needed to get smaller, and it appears to be doing that in more ways than one.

A VC: There Are Two Venture Capital Industries The first VC industry is investing in software based businesses. The software VC business has been fundamentally altered by the massive decrease in the cost of building and launching a software based business. I don't think I need to explain why this massive decrease in cost has happened to this audience. We've talked about that ad naseum here and on other tech blogs. The second VC industry is investing in cleantech, biotech and other capital intensive tech businesses that have economic models that have not been fundamentally altered. This VC industry operates largely the same way it has operated for the past twenty or thirty years.

The segmentation of the venture industry cdixon.org – chris dixon's blog Today, the venture financing industry is going through a similar segmentation process. Venture capital has only existed in its modern form for about 35 years. In the early days there were relatively few VCs. Entrepreneurs were happy simply getting money and general business guidance. Today, there is a surplus of venture capital and entrepreneurs have become increasingly savvy “shoppers.” As a result, competition amongst venture financiers has increased and their “customers” (entrepreneurs) have flocked to more specialized “products.”

A Tale Of Two VC Industries: The Web Versus Cleantech Last week, venture capitalist Fred Wilson wrote a post pointing out that the VC industry is split in two : software-based businesses and everything else (specifically, “cleantech, biotech and other capital intensive businesses”). Software businesses don’t require as much capital as they once did, and certainly not as much as cleantech or biotech. In fact, I’d go so far to say that the main asset venture capitalists bring to the table for Web startups is no longer capital, but rather connections, advice, and deal-making prowess.

Open the downloaded document, and select print from the file menu (PDF reader required). High Quality Venture Fund Performance

Sure! That would be real hand-made curation :-) But I'm still amazed by IRR of USV. That's not a f$cking hedge fund, for Christ's sake! It's pretty amazing.... by PED Sep 7

Yep. We should also look on the site of Calpers. They are the biggest investor in PE in the world and have a similar report. by wallen Sep 7

IRR for Union Square Ventures 2004 fund: 48.37% Ouch.... by PED Sep 7

What I *Would Have* Said at TechCrunch Disrupt | Both Sides of the Table

A VC: Web 2.0 Is A Gift, Not A Threat, To VCs

Things I'd do if I ran a big VC firm - cdixon's posterous

Seed fund phenomenon

Ten Meetings Per Day

» Early exits (without VC funding) | StartupNorth

Poking Fun At VCs - Forbes.com

The Arrogant VC: A View From the Trenches (full length version)

Redeye VC: Company Math vs VC Math

The 'We Need To Own' Baloney