Maimonides said: "A word fitly spoken is like apples of gold in a filigree vessel of silver."
But though many of the near-1,000 guests at the VC65 conference celebrating the 65th anniversary of venture capital (VC) in America appreciated the venue at the Massachusetts Institute of Technology far fewer paid attention to at least one of the speakers.
Scott Kupor, chief operating officer at Andreessen Horowitz, talked about the organisational changes his firm was making to aim for better returns.
Unfortunately, between a third and a half of those sitting round me were on their blackberries or otherwise ignoring the speech. As one VC said that evening when I asked about the speech: "I listened to the first minute then got on with my work as it didn’t seem relevant to me."
This was a surprise given how much trouble most VC firms are having raising more money.
Kupor was talking fresh from his VC firm that day having raised a further $200m to manage as a co-investment fund, on top of the $1bn raised in its debut and second funds since Andreessen Horowitz launched in July 2009.
By contrast, pretty well much the only other US-based VC firms to have raised money are the handful of top-tier firms with pedigrees often stretching back more than 30 years, such as Bessemer Venture Partners, Sequoia Capital, Insight Venture Partners and Kleiner Perkins Caufield & Byers that gathered $5.8bn in commitments to funds closing in the first 14 weeks of the year. (Coincidentally, research by Global Corporate Venturing shows this is almost exactly the amount raised by new corporate venturing funds so far this year – see the next issue for further details or below for a dozen stories on new funds.)
Learning how first-time fund managers can succeed and what limited partners will respond to, let alone an approach that might actually deliver positive returns over a decade is pretty relevant.
Unsurprisingly, therefore, Kupor said the approach that was resonating with investors was one built round how a corporation is managed: a leader with specialists in functional areas that are important for delivering performance, such as deal flow and research.
Large leveraged buyout firms moved this way over the past 15 years, following underperformance in the early to mid 1990s, but had the advantage of usually managing larger funds which deliver more management fees to pay for an expanded back office.
And some of the larger VC funds have gone the same way: Highland Capital Partners has a recruiting partner while Sequoia hired for portfolio management.
This approach is one corporate venturing units already offer, albeit often without making full advantage of the sizeable marketing, sales, legal and accounting teams within their parent organisation. It will also be one of the talking points at next month’s Global Corporate Venturing Symposium and Best Practices Banquet on May 18.
But as entrepreneurial companies require ever-increasing amounts of capital and so investment rounds get bigger, providing operational support beyond a rolodex of people you once knew becomes more important.
News provider PEHub.com, which is owned by data provider Thomson Reuters, said there had been eight investments of more than $100m in information technology companies this year, compared to one in the same period a year ago. (click for PEHub’s slideshow)
The only $100m-plus VC deal done between January 1 and April 5 2010 was for Extenet Systems, which builds telecom infrastructure for wireless service providers and raised $131m in a Series D round from communications equipment maker SBA Communications and VC firms Centennial Ventures, CenterPoint Venture Partners, Columbia Capital, Palomar Ventures, Sevin Rosen Funds, TowerBrook Capital Partners and SSP Offshore (an affiliate of Soros Fund Management).
The eight $100m-plus IT deals done in the same period this year (which excludes social media platform Facebook’s $1bn or clean-tech companies such as BrightSource Energy’s $125m or Fisker Automotive’s $150m) raised just more than $3bn in venture capital.
The eight according to PEHub are:
Amazon-backed daily deal website LivingSocial, which raised $400m;
Corporate venture-backed semiconductor maker Plastic Logic’s $200m (and up to $700m in total) from VC firm Oak Investment Partners and Russian state-backed Rusnano;
Online retailer 360Buy.com’s $1.5bn from VC firms Tiger Global Management, Hill House Capital and corporate venture-backed Digital Sky Technologies (DST);
Discount coupon provider Groupon’s $450m from VC firms Accel Partners, Andreessen Horowitz, Battery Ventures, DST, Greylock Partners, Kleiner Perkins Caufield & Byers, Maverick Capital, Maveron, New Enterprise Associates, Silver Lake and Technology Crossover Ventures;
Online consumer finance business Wonga.com’s $117.5m from UK-based endowment Wellcome Trust and VC firms Accel Partners, Balderton Capital Management, Dawn Capital, Greylock Partners, Meritech Capital Partners, Oak Investment Partners and TAG ;
Online clothing sale club Privalia Venta Directa’s $123m from VC firms General Atlantic, Highland Capital Partners, Index Ventures and Insight Venture Partners ;
Semiconductor maker Tabula’s $108m from VC firms Balderton Capital Management, Benchmark Capital, Crosslink Capital, Duff Ackerman & Goodrich, Greylock Partners, Integral Capital Partners and New Enterprise Associates; and
Thirty-year-old data software provider OSIsoft’s $135m from VC firms Kleiner Perkins Caufield & Byers and Technology Crossover Ventures.