The University of Texas Investment Management Co. is among the many limited partners burned by early stage, tech-focused venture capital funds launched during the dot-com bubble. But UTIMCO didn’t let that negative experience sour it on such funds – and it is now reaping the rewards.
Since 2005, the LP has backed seven early stage tech VC funds, committing a total of $230 million. As a group, those funds have drawn down $116.5 million, and have returned nearly $57 million in cash and are sitting on portfolios worth $339 million, according to peHUB’s analysis of new performance data provided by UTIMCO.
That’s a far cry from the aggregate performance of the four funds the big LP backed from 1999 to 2001. Those funds drew down $64.5 million, but returned just $13.6 million in cash and hold portfolios currently valued at about $29 million.
That abysmal performance prompted UTIMCO to hold off on making any further commitments to early stage tech VC funds until November 2004. That’s when Union Square Ventures came knocking. Whatever due diligence the LP performed on the first-time fund, it sure worked. Union Square Ventures 2004 is the most successful early stage tech VC fund it has backed and the second best-performing fund in its entire portfolio.
As of May 31, Union Square Ventures 2004 had an internal rate of return of 82.15 percent. UTIMCO committed $25 million to the vehicle, of which $22.25 million has been drawn down. Union Square has already returned $39.8 million in capital and its remaining portfolio of companies is worth more than $160 million, according to documents provided by UTIMCO.
What’s even more amazing is that Union Square has managed to significantly improve that fund’s performance in just the past three months, sending UTIMCO checks for more than $25 million during that time. As of Feb. 28, UTIMCO reported that the 2004-vintage fund had an IRR of 73.39%, had returned capital of $14.3 million and that the remaining value of the portfolio was $125.5 million.
Among the hot companies the Union Square’s 2004 fund has backed are micro-blogging company Twitter, which has been reportedly valued at $7 billion; social game developer Zynga, which has reportedly been valued at more than $11 billion and is in registration for an IPO; RSS management company Feedburner, acquired by Google in 2007 for a reported $100 million; social bookmarking site Del.icio.us, which was bought by Yahoo in 2005 for an undisclosed price (and later sold back to its founders); and behavioral advertising company Tacoda, which was bought by AOL in 2007 for a reported $275 million.
The only fund in UTIMCO’s portfolio that has out-performed Union Square’s 2004 fund is Resource Capital Fund V, a private equity fund focused on mining. UTIMCO committed $50 million to that 2010-vintage fund. So far, Resource Capital Fund V has drawn down $14.4 million, returned $4.2 million in cash and has a portfolio valued at $24 million. Given how quickly the fund has performed, its IRR was 152.12%, as of May 31.
Outside of Resource Capital, UTIMCO’s best performing funds are venture funds focused on — you guessed it — early stage technology investments. Foundry Venture Capital 2007 LP and Spark Capital II LP (vintage 2007) rank as the LP’s third and fourth best-performing funds overall. Like Union Square, Foundry and Spark have significantly boosted their performance in the past three months: UTIMCO reports that the IRR for Foundry Venture Capital 2007 surged from 57.25% on Feb. 28 to 79.17% on May 31, and the IRR for Spark Capital II shot up from 56.89% to 69.47% during that same period.
Take a look at the following slideshow for a detailed look at each of the 13 early stage tech VC funds backed by UTIMCO.
Partnership Name: Artiman Ventures III LP
Capital Invested: $5,500,000.00
Capital Returned to UTIMCO: $0.00
Current Value: $4,264,408.50
Cash-on-Cash Return: 0.00
Fund Formation Date: 7/29/2010
UTIMCO Commitment: $40,000,000.00
UTIMCO % Ownership: 19.95%