Venture Capital Notes 12/08

All week I’ve met with different investors (angel and institutional), entrepreneurs, and bankers and wanted to summarize my notes for the community.  Much of the information is hearsay from reliable sources, none of whom can be named.

1.  Companies are finding very little success with venture firms and are trying to appeal to large angel syndicates for low seven figure financing.

2. I’ve heard of two Second tier venture firms that are being told by some limited partners that they should not ask for “cash calls.” These are verbal warnings that at least in one case have lead to the beginning of some legal proceedings.  A lawyer for one firm told me, “What are they really going to do?  Sue their limited partners?  That’s a hard way to stay in business.”

3. I’ve met with three different financial and consulting firms that are still trying to raise small funds <$50mm funds.  Two of them intend to alter the 2 and 20 structure by reducing management fees and increasing general partnerships shares at certain performance levels.   None of them have completed a first close, but one expects to in q1 of next year.  Obviously, in the current climate nothing is done even when limited partners sign paperwork.

4.  Rumor has it that Harvard’s $35bn endowment is deeply over-invested in private equity.  Some claim that they have commitments ranging from $10bn to even as high as $20bn in the full landscape of private investment returns.  If they were to renegotiate on their commitments it could lead to real shortfalls at venture firms.  I have only heard this from one source and have been unable to confirm it from anyone else.

5.  I attended two angel events this week and looked a variety of people in the eye about investments.  Some of the more serious angels said they would continue to invest, but were concerned about their current investments ability to finance their growth through the venture industry.  Jeff Pulver insisted he would continue to invest in Israeli startups and said that two of his more recent deals had received $2mm plus institutional money.

6.  GoFish (acquired some of Bolt and I’m a shareholder) did a$22mm deal at probably not a poor valuation.  Still they got it done and that is impressive.    Gofish is public so somebody will do the work to figure all of this out.

7.  HuffingtonPost raised $25mm at a $75 pre-money also impressive.  I was quite skeptical of HuffPo during its rise, but you have to hand it to them.  Quantcast has them at US 9MM uniques.  That’s a big number to achieve organically.  Give management credit.  I do worry that it will be hard to hit the $50-$100mm in sales they will need to afford Oak its appropriate exit, but we’ll see.   With the capital they have raised they certainly are getting a crack at building a big business.

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4 Responses

  1. Point #2 is interesting – you know I think one result of the carnage is rethinking the 2/20 economics.

  2. Yes, it appears you may be prescient.

  3. I wouldn’t classify your GoFish stock as acquisition related.

  4. Yes, it wasn’t quite the deal we hoped for. Universal Music remains the evil empire.

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