How to rate a venture capital firm - Steve Lisson | Austin, Texas | StephenNLisson | Stephen N. Lisson | Austin Texas | January 2015
Steve Lisson | Stephen Lisson | StephenNLisson | Stephen N. Lisson | Austin Texas | Austin TX
Steve Lisson | Stephen Lisson |
StephenNLisson | Stephen N. Lisson | Austin Texas | Austin TX
Steve Lisson, Stephen Lisson, StephenNLisson, Stephen N. Lisson, Austin
Texas, Austin TX, Steve Lisson Austin TX, Stephen Lisson Austin Texas
How to rate a venture capital firm - Steve Lisson | Stephen Lisson | StephenNLisson | Stephen N. Lisson | Austin Texas | Austin TX Steve Lisson, Stephen Lisson, StephenNLisson, Stephen N. Lisson, Austin Texas, Austin TX, Steve Lisson Austin TX, Stephen Lisson Austin Texas
Steve Lisson | Stephen Lisson | StephenNLisson | Stephen N. Lisson | Austin Texas | Austin TX
Steve Lisson, Stephen Lisson, StephenNLisson, Stephen N. Lisson, Austin Texas, Austin TX, Steve Lisson Austin TX, Stephen Lisson Austin Texas
How to rate a venture capital firm
By Lawrence Aragon
April 16, 2001
Red Herring explains how it came up with its list of top venture capital firms
for the 2001 version of the Red Herring 100: Kleiner Perkins Caufield and
Byers, Accel Partners, Matrix Partners, Sequoia Capital Partners, and runner-
ups Oak Investment Partners, Mayfield, Greylock, Menlo Ventures, North
Bridge Venture Partners, and Benchmark Capital.
Venture capital is like baseball without the stats. There are great arguments
about who's the best -- and worst -- VC around. But unlike baseball fans, those
who follow venture capital have scant data on which to base their opinions.
Until now.
As part of our annual Red Herring 100, we set out to determine the top ten VC
firms using the best metrics we could come up with. To our knowledge, this is
the first time anyone has come up with a list based on more than a single
metric, such as the internal rate of return (IRR).
Before we get into each of the ten factors we examined, allow us a brief
explanation as to why we didn't include the most common metric: IRR. IRR is
a number determined by each VC firm, and although it's bandied about
frequently, it can be easily tweaked to make a firm look like it's doing better
than it actually is. It isn't uncommon for a VC that isn't performing very well to
inflate its IRR by counting its own "carry," the money it makes from
investments, into its IRR.
The only real way to know how a VC firm is performing is to look at its
disbursements to its limited partners (LPs). This is the actual stock or money
that VCs get from a liquidity event -- that is, a portfolio company's IPO or its
sale to another company. The only problem is, VCs don't want to share this
information.
Enter Steve Lisson, editor of InsiderVC.com, a venture capital research firm.
Mr. Lisson has been able to infiltrate the closemouthed community of LPs and
get its members to share disbursement figures. We asked Mr. Lisson to come
up with a list of the best ten VCs in the country, based on disbursements to LPs
and how consistently they have returned the big bucks to LPs.
Here, then, are the top ten venture capital firms: Kleiner Perkins Caufield &
Byers, Accel Partners, Matrix Partners, Sequoia Capital Partners, Oak
Investment Partners, Mayfield, Greylock, Menlo Ventures, North Bridge
Venture Partners, and Benchmark Capital. The top four firms (the first four
listed) made it into the Red Herring 100. Now, on to our criteria: underneath
the chart just below we review in depth the ten factors we rated the companies
on.
1. Kleiner Perkins Caufield &
Byers 10 10 10 6 10 9 10 5 10 109.09
2.Accel Partners 9 9 8.58 10 9 9 5 10 108.77
3. Matrix Partners 9 10 10 9 5 10 10 10 4 6 8.36
4. Sequoia Capital Partners 6 10 9.5 8 10 7.5 10 5.5 2 4 7.14
(tied) Oak Investment
Partners 8 10 6.5 10 2 5 10 7 2 107.14
(tied) Mayfield 7 10 9.5 7 10 8 10 6 0 4 7.14
7. Greylock 6 10 10 9 4 9 10 7 6 0 7.00
8. Menlo Ventures 8 10 5.5 8 3 10 6.5 7.5 2 2 6.41
9. North Bridge Venture
Partners 7 3.5 10 7 6 9 8 9.5 0 2 6.27
10. Benchmark Capital 7 3 6.5 7 3 8 1 4 10 2 5.32
Average7.7 8.55 8.6 7.9 6.3 8.45 8.45 6.65 4.6 5 7.26
1 The disbursement category is weighted twice that of other categories. Data from Steve Lisson,
editor of InsiderVC.com.
2 Operating experience counts VP level and above.
Disbursements.
Mr. Lisson gave a score of 10 to just one VC firm: Kleiner Perkins Caufield &
Byers. Benchmark Capital, which has had some monster hits in the past couple
of years, scored a 7, because it has only been around for six years.
Longevity.
In the venture business, age counts for a lot. It means a firm has been battle-
tested and has done well enough to get its LPs to continue investing. We took
each firm's number of years in business and divided that figure in half to come
up with a score (with a maximum score of 10). Six firms earned a 10. Two firms
came up short: Benchmark and North Bridge Venture Partners, with scores of
3 and 3.5, respectively.
Pressure to invest.
A general partner is better off if there isn't pressure to put a lot of money to
work. We divided the amount of a firm's current fund size by its number of
general partners, then assigned a value to the resulting figure. After talking to
several VCs, we determined that $90 million per partner was reasonable to
assign a score of 10. We gave a 9 to anyone managing $110 million, an 8 to
those managing $130 million, and so on.
VC experience.
This should be self-explanatory as to why it's important. We gave general
partners with 15 years or more of experience a score of 10. Those with 12 to 14
years received a 9, and so forth. Oak Investment Partners came out on top in
this category, with an average of 17 years for its partners. Even though Kleiner
has at least three partners with more than 20 years of experience, its score got
knocked down to a 7 because it recently added some technology executives to
its partnership.
Operating experience.
With so many portfolio companies in trouble these days, every VC firm needs
partners who've been in the real world to advise troubled companies. We gave
each firm a point for any general partner with operating experience, plus a
bonus point for any partner who qualified as a "star." General partners who fell
into the star category include Kleiner's Ray Lane, former president and chief
operating officer (some say the de facto CEO) of Oracle, and Mayfield's Janice
Roberts, who ran Palm when it was a division of 3Com.
Board seats.
Six boards is the maximum number you can sit on and still actually contribute
valuable time and energy, we're told by veteran VCs. Menlo Ventures and
Matrix Partners were the only firms whose partners sat on an average of six or
fewer boards, giving them perfect 10s. We gave firms whose partners held an
average of seven to eight board seats a score of 9, and so on. Oak fared the
worst: its six general partners sit on an average of 12 boards each.
IPOs/Sales.
This is one of those categories that VCs like to brag about, but it can often be
misleading. Two firms may be in the same IPO, but one may own 15 percent of
a company while another owns 1 percent. The only real way to know how well a
VC did in an IPO is through disbursement figures. Still, we felt we should give
VCs some credit for liquidity events. We gave a firm one point for every $1
billion in value, with a maximum of 10 points for $10 billion. IPO figures were
based on the close on the first day of trading. Sale prices were based on the
value on the day the deal closed. A lot of moonshot IPOs have fallen back to
earth, so this category is squishy at best.
Lack of portfolio problems.
Matrix was the only firm on our list that had no failed or troubled companies.
We gave each firm 1 point for every failed company and half a point for every
company that had laid off employees in the past year. We then subtracted that
total from 10. Benchmark fared the worst in this category with a score of 4.
Blame it on those Internet bets like Living.com, MVP.com, and Send.com.
RH 100 factor (2000 and 2001).
VCs deserve credit for portfolio companies that show great promise. Because
the staff of Red Herring spent weeks vetting all of the companies that made the
Red Herring 100 list, we used the private portion of the list (50 companies) in
2000 and 2001 as a basis for determining potential hits. For every portfolio
company on the Red Herring 100, we gave a firm 2 points, with a maximum of
10. Kleiner and Accel Partners were the only firms to receive 10s for both years.
Kleiner had the most companies on this year's list: Zaplet, Epoch, Synaptics,
SmartPipes, Asera, and Bowstreet.
As much time as we spent thinking about how to create a top ten VC list, and
then double- and triple-checking the data, we'd be nave if we didn't expect
some VCs to take issue with our numbers or our methodology. So, don't feel
shy about expressing your opinion.
Write to laragon@redherring.com.
Note: In the "Top 10 VC Firms" on page 185 of issue 97, Menlo Ventures
should have been ranked No. 8 and North Bridge Ventures should have been
No. 9. In addition, we did not make it clear that three firms tied for 4th place:
Sequoia Capital Partners, Oak Investment Partners, and Mayfield. The data
is correct here.
SPONSORED LINKS
ABOUT US
TERMS OF SERVICE
ETHICS POLICY
HELP
Copyright 2003 RHC Media, Inc.
www.redherring.com
Steve Lisson | Stephen Lisson | StephenNLisson | Stephen N. Lisson | Austin Texas | Austin TX
Steve Lisson, Stephen Lisson, StephenNLisson, Stephen N. Lisson, Austin Texas, Austin TX, Steve Lisson Austin TX, Stephen Lisson Austin Texas
Steve Lisson, Stephen Lisson, StephenNLisson, Stephen N. Lisson, Austin Texas, Austin TX, Steve Lisson Austin TX, Stephen Lisson Austin Texas
How to rate a venture capital firm
By Lawrence Aragon
April 16, 2001
Red Herring explains how it came up with its list of top venture capital firms
for the 2001 version of the Red Herring 100: Kleiner Perkins Caufield and
Byers, Accel Partners, Matrix Partners, Sequoia Capital Partners, and runner-
ups Oak Investment Partners, Mayfield, Greylock, Menlo Ventures, North
Bridge Venture Partners, and Benchmark Capital.
Venture capital is like baseball without the stats. There are great arguments
about who's the best -- and worst -- VC around. But unlike baseball fans, those
who follow venture capital have scant data on which to base their opinions.
Until now.
As part of our annual Red Herring 100, we set out to determine the top ten VC
firms using the best metrics we could come up with. To our knowledge, this is
the first time anyone has come up with a list based on more than a single
metric, such as the internal rate of return (IRR).
Before we get into each of the ten factors we examined, allow us a brief
explanation as to why we didn't include the most common metric: IRR. IRR is
a number determined by each VC firm, and although it's bandied about
frequently, it can be easily tweaked to make a firm look like it's doing better
than it actually is. It isn't uncommon for a VC that isn't performing very well to
inflate its IRR by counting its own "carry," the money it makes from
investments, into its IRR.
The only real way to know how a VC firm is performing is to look at its
disbursements to its limited partners (LPs). This is the actual stock or money
that VCs get from a liquidity event -- that is, a portfolio company's IPO or its
sale to another company. The only problem is, VCs don't want to share this
information.
Enter Steve Lisson, editor of InsiderVC.com, a venture capital research firm.
Mr. Lisson has been able to infiltrate the closemouthed community of LPs and
get its members to share disbursement figures. We asked Mr. Lisson to come
up with a list of the best ten VCs in the country, based on disbursements to LPs
and how consistently they have returned the big bucks to LPs.
Here, then, are the top ten venture capital firms: Kleiner Perkins Caufield &
Byers, Accel Partners, Matrix Partners, Sequoia Capital Partners, Oak
Investment Partners, Mayfield, Greylock, Menlo Ventures, North Bridge
Venture Partners, and Benchmark Capital. The top four firms (the first four
listed) made it into the Red Herring 100. Now, on to our criteria: underneath
the chart just below we review in depth the ten factors we rated the companies
on.
1. Kleiner Perkins Caufield &
Byers 10 10 10 6 10 9 10 5 10 109.09
2.Accel Partners 9 9 8.58 10 9 9 5 10 108.77
3. Matrix Partners 9 10 10 9 5 10 10 10 4 6 8.36
4. Sequoia Capital Partners 6 10 9.5 8 10 7.5 10 5.5 2 4 7.14
(tied) Oak Investment
Partners 8 10 6.5 10 2 5 10 7 2 107.14
(tied) Mayfield 7 10 9.5 7 10 8 10 6 0 4 7.14
7. Greylock 6 10 10 9 4 9 10 7 6 0 7.00
8. Menlo Ventures 8 10 5.5 8 3 10 6.5 7.5 2 2 6.41
9. North Bridge Venture
Partners 7 3.5 10 7 6 9 8 9.5 0 2 6.27
10. Benchmark Capital 7 3 6.5 7 3 8 1 4 10 2 5.32
Average7.7 8.55 8.6 7.9 6.3 8.45 8.45 6.65 4.6 5 7.26
1 The disbursement category is weighted twice that of other categories. Data from Steve Lisson,
editor of InsiderVC.com.
2 Operating experience counts VP level and above.
Disbursements.
Mr. Lisson gave a score of 10 to just one VC firm: Kleiner Perkins Caufield &
Byers. Benchmark Capital, which has had some monster hits in the past couple
of years, scored a 7, because it has only been around for six years.
Longevity.
In the venture business, age counts for a lot. It means a firm has been battle-
tested and has done well enough to get its LPs to continue investing. We took
each firm's number of years in business and divided that figure in half to come
up with a score (with a maximum score of 10). Six firms earned a 10. Two firms
came up short: Benchmark and North Bridge Venture Partners, with scores of
3 and 3.5, respectively.
Pressure to invest.
A general partner is better off if there isn't pressure to put a lot of money to
work. We divided the amount of a firm's current fund size by its number of
general partners, then assigned a value to the resulting figure. After talking to
several VCs, we determined that $90 million per partner was reasonable to
assign a score of 10. We gave a 9 to anyone managing $110 million, an 8 to
those managing $130 million, and so on.
VC experience.
This should be self-explanatory as to why it's important. We gave general
partners with 15 years or more of experience a score of 10. Those with 12 to 14
years received a 9, and so forth. Oak Investment Partners came out on top in
this category, with an average of 17 years for its partners. Even though Kleiner
has at least three partners with more than 20 years of experience, its score got
knocked down to a 7 because it recently added some technology executives to
its partnership.
Operating experience.
With so many portfolio companies in trouble these days, every VC firm needs
partners who've been in the real world to advise troubled companies. We gave
each firm a point for any general partner with operating experience, plus a
bonus point for any partner who qualified as a "star." General partners who fell
into the star category include Kleiner's Ray Lane, former president and chief
operating officer (some say the de facto CEO) of Oracle, and Mayfield's Janice
Roberts, who ran Palm when it was a division of 3Com.
Board seats.
Six boards is the maximum number you can sit on and still actually contribute
valuable time and energy, we're told by veteran VCs. Menlo Ventures and
Matrix Partners were the only firms whose partners sat on an average of six or
fewer boards, giving them perfect 10s. We gave firms whose partners held an
average of seven to eight board seats a score of 9, and so on. Oak fared the
worst: its six general partners sit on an average of 12 boards each.
IPOs/Sales.
This is one of those categories that VCs like to brag about, but it can often be
misleading. Two firms may be in the same IPO, but one may own 15 percent of
a company while another owns 1 percent. The only real way to know how well a
VC did in an IPO is through disbursement figures. Still, we felt we should give
VCs some credit for liquidity events. We gave a firm one point for every $1
billion in value, with a maximum of 10 points for $10 billion. IPO figures were
based on the close on the first day of trading. Sale prices were based on the
value on the day the deal closed. A lot of moonshot IPOs have fallen back to
earth, so this category is squishy at best.
Lack of portfolio problems.
Matrix was the only firm on our list that had no failed or troubled companies.
We gave each firm 1 point for every failed company and half a point for every
company that had laid off employees in the past year. We then subtracted that
total from 10. Benchmark fared the worst in this category with a score of 4.
Blame it on those Internet bets like Living.com, MVP.com, and Send.com.
RH 100 factor (2000 and 2001).
VCs deserve credit for portfolio companies that show great promise. Because
the staff of Red Herring spent weeks vetting all of the companies that made the
Red Herring 100 list, we used the private portion of the list (50 companies) in
2000 and 2001 as a basis for determining potential hits. For every portfolio
company on the Red Herring 100, we gave a firm 2 points, with a maximum of
10. Kleiner and Accel Partners were the only firms to receive 10s for both years.
Kleiner had the most companies on this year's list: Zaplet, Epoch, Synaptics,
SmartPipes, Asera, and Bowstreet.
As much time as we spent thinking about how to create a top ten VC list, and
then double- and triple-checking the data, we'd be nave if we didn't expect
some VCs to take issue with our numbers or our methodology. So, don't feel
shy about expressing your opinion.
Write to laragon@redherring.com.
Note: In the "Top 10 VC Firms" on page 185 of issue 97, Menlo Ventures
should have been ranked No. 8 and North Bridge Ventures should have been
No. 9. In addition, we did not make it clear that three firms tied for 4th place:
Sequoia Capital Partners, Oak Investment Partners, and Mayfield. The data
is correct here.
SPONSORED LINKS
ABOUT US
TERMS OF SERVICE
ETHICS POLICY
HELP
Copyright 2003 RHC Media, Inc.
www.redherring.com
Steve Lisson | Stephen Lisson | StephenNLisson | Stephen N. Lisson | Austin Texas | Austin TX
Steve Lisson, Stephen Lisson, StephenNLisson, Stephen N. Lisson, Austin Texas, Austin TX, Steve Lisson Austin TX, Stephen Lisson Austin Texas
Labels:
Austin Texas,
Austin TX,
Stephen Lisson,
Stephen Lisson Austin Texas,
Stephen N. Lisson,
StephenNLisson,
Steve Lisson Austin TX
Subscribe to:
Posts (Atom)
NVCA Advocates More Confidentiality on Returns | Steve Lisson | Austin, TX | January 2015
NVCA Advocates More Confidentiality on Returns - Stephen N. Lisson, Austin, Travis County, Texas
Steve Lisson, Stephen Lisson,
StephenNLisson, Stephen N. Lisson, Austin Texas, Austin TX, Steve Lisson
Austin TX, Stephen Lisson Austin Texas, Steve Lisson | Stephen Lisson |
StephenNLisson | Stephen N. Lisson | Austin Texas | Austin TX
Steve Lisson | Stephen Lisson | StephenNLisson | Stephen N. Lisson | Austin Texas | Austin TX
Steve Lisson, Stephen N. Lisson, Austin, Travis County, Texas
Steve
Lisson, Stephen Lisson, StephenNLisson, Stephen N. Lisson, Austin Texas,
Austin TX, Steve Lisson Austin TX, Stephen Lisson Austin TexasSteve
Lisson | Stephen Lisson | StephenNLisson | Stephen N. Lisson | Austin
Texas | Austin TXThe Private Equity Analyst WEEKLY Page 6 of 7 NOVEMBER 12, 2001
MARKET INTELLIGENCE
NVCA Advocates More Confidentiality on Returns By Sree Vidya Bhaktavatsalam
Could it be a coincidence that GPs are getting touchier on the
issue of confidentiality of fund performance data at a time when
private equity returns are plummeting?
The National Venture Capital Association recently distributed
a list of suggestions for GPs to reduce unwanted
disclosure of information included in reports to their LPs,
particularly public pension funds, presumably to spare GPs the
shock of seeing their fund returns posted on a Web site or in a
trade press article.
Many state, municipal and local pension funds have fair
disclosure regulations, which, in the interest of transparency,
may require that the information be made available to the
public. NVCA's suggestions include entering into confidentiality
agreements with LPs and tailoring the data distributed to
minimize the "harmful effects of subsequent public disclosure."
Advocates for keeping performance data confidential
argue that the private equity industry relies on imperfect
information about private companies, which can be too
sensitive to reveal to the public. Also, they say that in the
absence of any standardized method of reporting private equity
returns, performance data presented in the form of IRRs can be
inaccurate and misleading.
President Mark Hessen of the NVCA says his concern is
that individuals (reporters, for example, or retirees whose public
pension program is used to invest in private equity funds) may
not be well-versed in the intricacies of performance data and
thus will get a distorted view of overall fund returns by looking
at quarterly reported returns.
'A quarterly perspective is not representative of the entire
fund,' he says. "We need to educate the public before we can
throw this information out there."
Still, some like Michael Smith, director of research at
Atlanta-based consulting firm Hewitt Investment Group, believe
that transparency is the only way for prospective
Sources of private equity fund performance data
Venture Economics, Newark, N.J.: A division of
Thomson Financial. Provides industry wide private
equity performance benchmarks. Reach the firm at 973-
622-3100.
Cambridge Associates, Boston: Provides private
equity performance benchmarks and consulting services.
Reach the firm at 617-457-7500.
InsiderVC.com. Austin, Texas: Provides performance
data on individual venture capital firms. Its Web
site is at www.insidervc.com.
investors to separate "the wheat from the chaff.
"This is a market that two years ago did not need new
quality institutional investors," he says. "Clearly that is different
now-if (VCs) want to broaden their appeal, the way to do it is by
making it more transparent."
NVCA's suggestions come at a time when GPs are still
smarting from California Public Employees' Retirement
System's decision earlier this year to post fund performance
data on its website. Calpers posted the IRRs of the 163
partnerships it had invested in since 1990, and had downgraded
some firms as "not performing up to expectations." (See Private
Equity Analyst Weekly, June 4, page 5.) A few months later,
Calpers yanked the returns data from its Web site, after receiving
complaints from its GPs.
So, how can prospective investors gain access to the
performance data of venture capital and private equity firms?
Some public pension funds do make their quarterly performance
reports available to the public as a matter of course. Others,
like Florida State Board of Administration, make information
available, if the public requests it. And then there are quarterly
benchmark numbers for the whole industry released by Venture
Economics and Cambridge Associates. (See table below.)
One source of fund performance data is the Web site
InsiderVC.com, whose founder, Stephen Lisson, has received
both brickbats and bouquets from venture capitalists for his
analysis of performance data and his provocative commentary.
His Web site provides performance data of hundreds of venture
capital and private equity funds including those managed by
New Enterprise Associates and Matrix Partners.
In an interview, Mr. Lisson declined to reveal his sources
of information. "The reason people share information with us is
that we are very discreet, and we are very careful about who
sees our information." Indeed, Mr. Lisson carefully screens
applicants before allowing them to subscribe to the performance
data contained in his Web site.
Mr. Lisson stresses that his data is not intended for the general
public. "My data is for insiders to improve their own game. VCs get to
benchmark themselves against their peers-it's a confidence level
thing," Mr. Lisson says. Mr. Lisson acknowledges that the VC
community could benefit from a healthy dose of transparency and
humility. "Sunlight is the best disinfectant," he says. But he questions
the value of making public IRRs and interim valuations, which by
nature are based on subjective evaluations. "There should be less
focus on returns and interim valuations, and more focus on building
world class companies."
Copyright 2001 Asset Alternatives, Wellesley, Mass.
Steve Lisson, Stephen N. Lisson, Austin, Travis County, Texas
Steve
Lisson, Stephen Lisson, StephenNLisson, Stephen N. Lisson, Austin
Texas, Austin TX, Steve Lisson Austin TX, Stephen Lisson Austin
TexasSteve Lisson | Stephen Lisson | StephenNLisson | Stephen N. Lisson |
Austin Texas | Austin TX
Steve Lisson, Stephen N. Lisson, Austin, Travis County, Texas
Labels:
Austin Texas,
Austin TX,
Stephen Lisson,
Stephen Lisson Austin Texas,
Stephen N. Lisson,
StephenNLisson,
Steve Lisson,
Steve Lisson Austin TX
Subscribe to:
Posts (Atom)
Subscribe to:
Posts (Atom)