Since my last post debunking the five alleged myths of entrepreneurs triggered more than a few comments and thoughtful reactions, I wanted to respond collectively to them.

First let’s start out with venture capital performance as an asset class. Over the last ten years, it has been terrible. On an absolute basis the returns are in the low single digits. My partner at New Atlantic Ventures, Todd Hixon recently weighed in on the shape of VC today here to explain what’s going on behind the scenes.

What caused this? VC managers got greedy in the 1999-2001 period as LPs threw more money at them. Fund sizes mushroomed at the same time that the IPO market dried up. They were caught with too much money in sub-par companies, and no way out but modest M&A for an exit....

Read more »

Wow. It isn’t often that I drop everything after I read an article and feel compelled to respond.
But I was dumbstruck when I read this piece in the Washington Post.

It was titled: Five myths about entrepreneurs. In around 1000 words, the author went on to trash the National Venture Capital Association, Peter Thiel, Jason Calacanis and Fred Wilson, using “scientific research” to try to prove them wrong.

This just goes to show why academics don’t “get” entrepreneurs, don’t understand job creation and don’t make good VCs. It also proves that academics looking to make headlines can do so by using bogus statistics and misleading phrases.

So how did he get this so-called research SO wrong and backwards? I mean, his conclusions are mind-boggling in t...

Read more »

NASDAQ had its all-time peak on March 10, 2000, when it closed at just under 5,050. The market had been on an absolute tear for several months, having risen from 2,732 the prior October. The world had made it through Y2K, the dotcoms were winning everyone’s hearts and minds, and the last hold-out investors were going long tech.

At the time, I was a fresh-faced venture capitalist extremely excited about the swelling tech industry. I had spent the 80s deep in technology (a couple of tech startups followed by graduate school at M.I.T.) and the 90s figuring out the capital markets (McKinsey & Company, Lehman Brothers, and Putnam Investments).

I was ready. I knew all about technology and capital markets and I was going to spend the rest of my career combining my ex...

Read more »

The venture capital industry has changed over the past 5 years in ways that I believe will be lasting rather than temporal change. We are in the process of our own creative destruction with new market entrants and new models of innovation at the precise moment that our industry itself is contracting.

When the dust settles, although we will have fewer firms, each type well end up more focused on traditional stage segments that cater to the core competencies of that firm. The trend of funding anything from the first $25,000 to funding $50 million at a $1 billion-plus valuation is unlikely to last as the skills and style to be effective at all stages are diverse enough to warrant focus.

I will argue that LPs who invest in VC funds will also need to adjust a bit as well.

In 1998, I received a request from the CEO of Putnam Investments to lead an Internet strategy project. Amazon.com had gone public in 1997, and there was a concern within most companies that the Internet would disintermediate their distribution channels similar to what was happening in the book retail industry.

From a financial services perspective, E-Trade appeared to be outflanking the industry by offering trading over the Internet, and many of the senior investors at Putnam thought that we should be doing the same thing (Putnam historically sold its investment products through financial advisors).

The broader issue at the time was how Putnam could capitalize on the Internet.

As a former McKinsey & Company consultant, I was well trained on fact-based analysis, ...

Read more »

By this measure, early stage funds have a slight edge over later stage ones in CalPERS’ venture capital portfolio. Four of the top 10 cash generators from 2001 to 2005 are early stage investment vehicles, while three are later stage. Two are balanced or generalist funds.

This is according to a peHUB analysis of cash returns that compared the cash the money manager pocketed with the cash i...

Read more »

The rights come into play after Nov. 5 for Technology Crossover Ventures and Sequoia Capital, which invested when eHarmony raised $110 million in 2004.

The firms will have the right to require eHarmony to buy back their preferred shares in four quarterly installments, accordi...

Read more »

Wednesday, however, with Steve Jobs just stepping down as CEO of the most valuable technology company on Earth, the planned IPOs of Jive Software, Brightcove, Eloqua and Genomatica took a backseat as the conversation topic du jour in tech circles.

That said, there’s some conversation-worthy material to be gleaned from the new filers about how startups an...

Read more »