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January 18, 2014

2014 Stephen Lisson
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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Steve Lisson | Stephen Lisson | Stephen N. Lisson | Austin Texas
January 18, 2014

2014 Stephen Lisson

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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Stephen Lisson

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Saturday, January 18, 2014


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Steve Lisson | Stephen Lisson | Stephen N. Lisson | Austin Texas
January 18, 2014

2014 Stephen Lisson

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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http://www.nytimes.com/2001/09/26/technology/26VENT.html

The New York Times
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September 26, 2001

Venture Capital Financing Is Further Sapped by Events

By MATT RICHTEL
SAN FRANCISCO, Sept. 25 — Venture capital investing, the high-risk financing of early-stage companies that has been markedly curtailed in the last year, is being further challenged in light of the recent terrorist attacks and growing signs of recession, those investors say.
The venture capitalists assert that the slowing of the economy, coupled with an uncertainty about the public markets, is affecting all facets of their industry, including their ability to raise new funds, their decisions about which and how many companies to invest in, and their expectations about when their existing investments will become profitable.
Putting a fine point on the concern, the National Venture Capital Association issued a statement today saying the industry "is preparing for an extremely difficult economic environment" in the next 12 to 18 months.
At the heart of the issue is a question about how venture capitalists can expect to sell the investments they make. Typically they take their companies public, or sell them outright. But those so-called "exit strategies" are sharply limited, said Mark Heesen, president of the National Venture Capital Association, a trade group based in Arlington, Va., with 400 member firms.
"We were already in tough times," Mr. Heesen said. "What Sept. 11 did was make the likelihood of the I.P.O. market opening in the next four quarters pretty unlikely. A lot of V.C.'s are saying it might not open until 2003," using the abbreviation for venture capitalists.
The investors say that as a result, they must put more money into companies in which they are already invested, making sure to keep them afloat until an exit strategy emerges. The numbers on investments made in new companies bear that out: this year, venture capitalists will invest about $50 billion in start-up companies, Mr. Heesen said, compared with $105 billion last year.
Still, venture capitalists point out that this market appears to be so difficult because this year is being compared with the two years previous, which were anomalies, with exorbitant returns being driven by the dot-com boom, and the expansion of the public markets.
Steve N. Lisson, editor and publisher of InsiderVC.com, said recent events were reminiscent of the time around the gulf war, when the industry had its last downturn. At that time, the ability to attract capital to invest in start-ups "fell off dramatically," but he said the industry bounced back within several years to have the "best period in its history."
AN FRANCISCO, Sept. 25 — Venture capital investing, the high-risk financing of early-stage companies that has been markedly curtailed in the last year, is being further challenged in light of the recent terrorist attacks and growing signs of recession, those investors say.
The venture capitalists assert that the slowing of the economy, coupled with an uncertainty about the public markets, is affecting all facets of their industry, including their ability to raise new funds, their decisions about which and how many companies to invest in, and their expectations about when their existing investments will become profitable.
Putting a fine point on the concern, the National Venture Capital Association issued a statement today saying the industry "is preparing for an extremely difficult economic environment" in the next 12 to 18 months.
At the heart of the issue is a question about how venture capitalists can expect to sell the investments they make. Typically they take their companies public, or sell them outright. But those so-called "exit strategies" are sharply limited, said Mark Heesen, president of the National Venture Capital Association, a trade group based in Arlington, Va., with 400 member firms.
"We were already in tough times," Mr. Heesen said. "What Sept. 11 did was make the likelihood of the I.P.O. market opening in the next four quarters pretty unlikely. A lot of V.C.'s are saying it might not open until 2003," using the abbreviation for venture capitalists.
The investors say that as a result, they must put more money into companies in which they are already invested, making sure to keep them afloat until an exit strategy emerges. The numbers on investments made in new companies bear that out: this year, venture capitalists will invest about $50 billion in start-up companies, Mr. Heesen said, compared with $105 billion last year.
Still, venture capitalists point out that this market appears to be so difficult because this year is being compared with the two years previous, which were anomalies, with exorbitant returns being driven by the dot-com boom, and the expansion of the public markets.
Steve N. Lisson, editor and publisher of InsiderVC.com, said recent events were reminiscent of the time around the gulf war, when the industry had its last downturn. At that time, the ability to attract capital to invest in start-ups "fell off dramatically," but he said the industry bounced back within several years to have the "best period in its history."
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February 5, 2001
"The Thrill of Defeat" The Boston Globe
By Beth HealyVenture capital returns are plunging. The IPO market is a minefield. Internet start-ups are flaming out faster than you can say stock option. And Kevin Landry couldn't be happier.
The chief executive of Boston's TA Associates, pictured above, is relishing a return to the bad old days of venture capital. That's right, the bad old days. Before the Internet became an excuse to throw caution to the wind. Before the bull market turned into a frat party. Before fledgling incubators could make billions of dollars on half-baked business ideas.
''We were up 100 percent in 1999,'' Landry says of the firm's investment returns. ''I can't tell you how bad we felt.''
The TA partners felt bad because they weren't in the thick of the Internet extravaganza. One of the nation's largest and oldest venture firms, with $5 billion under management and an appetite for late-stage deals, TA was largely on the sidelines from 1998 through 2000, while less experienced investors amassed fortunes backing dot-coms and high-tech start-ups.
Even a wise elder of the venture business, as Landry, 56, is widely considered, felt pangs of jealousy these past few years.
''The start-up guys were knocking the cover off the ball,'' Landry says. ''I tried to explain to my wife that I'm a failure.''
Many competitors now laud TA for sticking largely to its knitting: investing in profitable companies, between $10 million and $100 million per deal. But in the ''opportunity business,'' as Landry calls venture, there's little solace in high principles and a solid three-decade track record when one's rivals are getting filthy rich.
In fact, resentment over missed opportunities began to bubble up inside the firm, particularly among the ranks of younger, junior partners. By 1999, when tech stocks were soaring, TA's 44 percent average annual returns suddenly seemed tepid. Landry found himself in the unpopular role of sober father figure. He was shorting shares of then-hot CMGI Inc. and warning his colleagues against high-priced risky deals.
''When the market was overwhelming, there was internal strife,'' says one person who runs a TA-backed company.
That summer, the unthinkable happened. Bruce Johnston, a rising star among the firm's junior partners, resigned in August to start a Boston office for idealab!, a Silicon Valley-based incubator that was riding high on the dot-com wave. Landry says he was disappointed. Some people were even in tears.
''We were very sorry that Bruce left,'' says Andy McLane, a managing partner and part of TA's four-member executive committee. ''There's no doubt in my mind or anybody else's that Bruce was going to be a full-fledged partner, a managing director.''
Johnston, 41, says leaving TA was ''brutal,'' the toughest decision of his career. And his timing, as it turned out, was bad. Within a year, the Internet market had crashed and idealab! had withdrawn its planned initial public stock offering. Johnston, who was lured to the firm by his former Lotus friend, Bill Gross, recently had to cut his staff.
Recalling his urgency to jump on the Internet bandwagon and leave TA, Johnston says, ''It was just sort of this surreal environment.''
He explains, ''When you see people at a cocktail party who invested $1 million and got $1 billion back in a year, that's a little frustrating.''
Witness the similar case of envy that drove leveraged buyout titans like Boston's Thomas H. Lee Co. and New York's Kohlberg Kravis Roberts & Co. into Web deals last year - a tad late, most observers agree. TA, too, made some pricey bets in 2000.
Last April, McLane, the managing director, could barely hide his excitement over Questia, a Houston-based online library start-up that went live last month. TA put $45 million into the company, a sum McLane now admits was high. But he still has high hopes for the company.
''I really thought Questia had a very substantial business model,'' says McLane, who's credited with inking some of TA's best deals, like the purchase and resale of AIM Management Group - a $35 million deal on which the firm made 24 times its money. ''I did then. I do now.''
But he concedes there was some ''setting aside of the traditional rules.''
''I haven't made an investment in a company that wasn't profitable in probably 10 years,'' he says.
Johnston blames his departure from TA on a mid-life crisis. But he says he doesn't regret getting into the start-up game. He's working on his third new company now. And he likes managing people, he says. ''But we certainly haven't grown the way we thought we would.''
This return to normalcy is being lamented across the country, in high-tech circles and among the nouveau venture crowd. Many VCs are likening the current market to the more difficult days of the 1980s. And at TA, the environment is becoming considerably more comfortable, partners say.
''It's a lot different than it was a year ago. We're more united,'' Landry says. ''The things we're going to be fighting aggressively are our competitors and the economy - and not ourselves.''
TA's investment returns in 2000 were roughly zero, partners estimate. That's better than the losses some firms may show, they argue, but it's certainly not going to impress the firm's clients. But Landry says the firm is ''coming back.'' After a couple of years of identity crisis - dabbling in start-ups, struggling to find mature companies that weren't overpriced - Landry insists the firm is clear in its mission: technology buyouts.
In December, TA did a second round at Datek Online Holdings Corp., the Web brokerage, in a $700 million deal with Boston's Bain Capital and Silver Lake Partners of Silicon Valley. Landry thinks plenty of buyout opportunities will present themselves as tech companies lose hope of going publicand look for buyers.
He also expects TA, like other private equity firms, will spend more time with its portfolio companies in the coming year to help make those investments successful. With the economy slowing down, Landry says, business is bound to get more difficult.
Back in 1983, when venture capital went through an ugly cycle, Landry says, TA had to grapple with having invested in some lower-quality companies. The firm had to let some companies go out of business, and cut the number of boards on which its partners served.
''I knew this time we'd make a different mistake,'' he says. ''There are prices I wish we hadn't paid.''
Plenty of venture capitalists swear they prefer to spend their time toiling alongside their favorite entrepreneurs. Landry is perhaps more honest: ''It's much more fun to just go out and do deals and make seven or eight times your money.''
It's Landry's straight-shooting manner and wisdom, people who know him say, that has helped make TA such a strong firm. He was one of the original hires when Peter Brooke started TA - spinning out of Boston brokerage Tucker Anthony - back in 1967.
''He's a very competent manager,'' says Brooke, who went on to start Advent International in Boston. ''He's very smart. He has a great sense of urgency.'' Brooke adds, ''He's kept that company together for a long time.''
Most of the seasoned venture capitalists on the East Coast trace their beginnings back to TA. Summit Partners' founders worked at TA. So did Bill Egan, who would later start Burr Egan Deleage & Co., and whose firm would spawn Alta Communications and Polaris Venture Partners.
William Collatos, a former bank lender like Brooke, cut his teeth in the venture business at TA starting in 1980. After becoming a general partner, he helped start a TA spinout, Media/Communications Partners (now called M/C Partners). He went on in 1983 to cofound Spectrum Equity Investors, a Boston venture firm that invests heavily in the telecom sector. Brion Applegate, his cofounder at Spectrum, also started his career at TA in 1979.
Any number of venture pros call TA a training ground, the Harvard Business School of venture capital. They only leave, Collatos says, to become general partners of their own firms.
''Many people went on to be very successful in venture capital, in no small part due to the discipline and experience of that environment,'' Collatos says of TA. And while Landry puts high value in loyalty, he doesn't hold a grudge, Collatos says.
''When we went out to raise our first fund, at a very difficult time in the market [1993], Kevin and his partners were our personal financial backers,'' Collatos says. ''I took it as a statement of confidence, but also as a statement of friendship.''
But make no mistake about Landry's competitiveness. He says in the recently published book ''Done Deals,'' that Brooke left TA because ''Peter was less interested in making money than I am.'' Landry is in the venture business because it's fun, he says. And to make money for the firm's investors and partners. Few complaints there: TA's 1993 fund and its 1988 fund both returned to investors more than 325 percent of their money, according to estimates by Stephen Lisson of InsiderVC.com.
Sitting out the Internet jackpot was enough to make any good dealmaker squirm. But now, Landry says, ''I'll take our portfolio over almost anyone else's.''
Beth Healy can be reached by e-mail at bhealy@globe.com.
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