Another Look at VC-Backed Busts

Updated Lots of talk today about VC-backed busts, after InsideCRM published its list of the 20 Worst Venture Capital Investments of All Time. I tried getting comment from some actual VCs who backed companies on the InsideCRM list, but have so far been unsuccessful (I know, real shocking). While we keep waiting, here is a file of every single VC-backed bomb on record in the Venture Economics database: VCBusts.xls

It includes how much money each company received, and its Top 20 diverges quite a bit from what was compiled by InsideCRM. For example, our top dog is Formus Communications Inc., which raised over $500 million between 1996 and 2000. InsideCRM “leader” Amp’D Mobile doesn’t appear on our chart until number 7. 

In all, we uncovered 4,300 VC-backed busts that raised over $63 billion in funding. To qualify, a company had to meet three qualification: (1) Raised VC funding between 1990 and 2007; (2) Be based in the United States; and (3) Have since gone out of business and/or declared Chapter 7 or Chapter 11 bankruptcy. Unlike InsideCRM, we did not include companies that were acquired (even if the sale price was a pittance compared to the initial investment). Not because there aren’t hundreds deserving of bust status, but because it made the database work too complex.

In case you’re interested, I also looked at which VC firms had backed the most losers. It’s an interesting grouping, with some selection bias toward firms that do lots of deals. It goes like this:

  1. JPMorgan Partners
  2. New Enterprise Associates
  3. Intel Capital
  4. Bessemer Venture Partners
  5. Oak Investment Partners
  6. Kleiner Perkins Caufield & Byers
  7. Sequoia Capital
  8. Mayfield Fund
  9. Windspeed Ventures
  10. BancBoston Ventures/BancBoston Capital

(Note: JPMorgan Partners has since split into two firms. The buyout/growth equity team became CCMP Capital, while the VC team became Panorama Capital).

Update: I’ve also broke down the entire grouping by industry sector (using MoneyTree categories).

1. Telecom (19.96% in terms of dollars lost)
2. Software (14.75%)
3. Networking & Equipment (11.27%)
4. Media & Entertainment (9.37%)
5. IT Services (8.12%)
6. Retailing/Distribution (5.59%)
7. Consumer Products & Services (5.03%)
8. Biz Products & Services (3.84%)
9. Financial Services (3.44%)
10. Medical Devices (3.03%)
11. Industrial/Energy (3.02%)
12. Semiconductors (3.01%)
13. Healthcare Services (3%)
14. Computers/Peripherals (2.63%)
15. Biotech (2.62%)
16. Electronics/Instrumentation (1.06%)

Here’s the chart: IndustryBusts.xls

Related Posts

13 Comments

  • An argument could be made that if you’re not on that Top 10 list, you’re not doing your job — which is to take big, calculated risks. There are 5 names on that list that I would not hesitate plowing my 401K into if I were given the opportunity. It’s easy to come up with big VC failures because that’s the nature of the business. Go big or go home.

  • [...] SmartChristian.com wrote an interesting post today!.Here’s a quick excerpt Lots of talk today about VC-backed busts, after InsideCRM published its list of the 20 Worst Venture Capital Investments of All Time. I tried getting comment from some actual VCs who backed companies on the InsideCRM list, but have so far been unsuccessful (I know, real shocking). While we keep waiting, here is a file of every single VC-backed bomb on record in the Venture Economics database: VCBusts.xls It includes how much money each company received, and its Top 20 diverges quite a bit from [...]

  • [...] Dan Primack takes a look at some of the biggest losers with regards to VC-funded companies: In all, we uncovered 4,300 VC-backed busts that raised over $63 billion in funding. To qualify, a company had to meet three qualification: (1) Raised VC funding between 1990 and 2007; (2) Be based in the United States; and (3) Have since gone out of business and/or declared Chapter 7 or Chapter 11 bankruptcy. Unlike InsideCRM, we did not include companies that were acquired (even if the sale price was a pittance compared to the initial investment). Not because there aren’t hundreds deserving of bust status, but it made the database work too complex. [...]

  • …in other words, VCs aren’t all geniuses with the Midas touch? And perhaps business plans, financial modeling, projections and metrics don’t mean as much as they suggest. as InsideCRM writes about a bust: “Despite being measured as the ‘benchmark against which all other sites are measured,’ eToys ended in bankruptcy.” Go figure.

    You can add another one to the list: PayByTouch. A great read from TheAlarmClock: http://www.thealarmclock.com/mt/archives/2007/11/paybytouch_inve.html

  • Would be interesting to see by company who the backers were.

  • Chris,

    I’ll get to that later in the day for the top 20. be too unweildy a file for all of them…

  • Very interesting, but I do know that the data for my old startup, Ecos Technologies was off by a factor of three. Let’s hope that this is not indicative of the accuracy of the entire database. I wonder how others consider the accuracy of data on their former ventures.

  • This is a very interesting topic, one thats not discussed enough in my opinion. Just have one major question- where are you getting the data for companies that are now Defunct? I don’t think that these firms are openly providing this kind of information. How accurate is the “bust” data that you have?

  • I think it would also be interesting to see how long it took each company to burn through the funding that it received.

  • What about best returns of all time? Other than IPO data, is there any way to track that?

  • How about a list of the worst IPO’s? Which companies went from public offering to Chap. 11 most quickly? My vote: A poster child of the .com bubble, the Globe.com. The business model was always a mystery.

  • [...] Random RamblingsIn the spirit of tomorrow’s holiday, please take a moment to give thanks for all the singles, doubles, triples and homeruns you’ve hit over your career. I’ll even give you a paragraph break to reflect…Moment over? Good, because what follows is all about the strikeouts:InsideCRM yesterday published a list of what it called the 20 Worst Venture Capital Investments of All Time. My initial follow-up was to get comments from VCs who were involved in the aforementioned busts, to kind of create an anti-anti-portfolio. But it was apparently a case of piling on, or perhaps these particular VCs simply are unaccustomed to self-depreciation. Replies were few and very far between. So I decided to make my own list, by using the Venture Economics database. It includes how much money each company received, and its Top 20 diverges quite a bit from what was compiled by InsideCRM. For example, our top dog is Formus Communications Inc., which raised over $500 million between 1996 and 2000. In place and show were Digital Access Inc. ($490m) and VeloCom ($442m). InsideCRM “leader” Amp’D Mobile doesn’t appear on our chart until number 7.In all, we uncovered 4,300 VC-backed busts that raised over $63 billion in funding. To qualify, a company had to meet three qualification: (1) Raised VC funding between 1990 and 2007; (2) Be based in the United States; and (3) Have since gone out of business and/or declared Chapter 7 or Chapter 11 bankruptcy. Unlike InsideCRM, we did not include companies that were acquired (even if the sale price was a pittance compared to the initial investment). Not because there aren’t hundreds deserving of bust status, but because it made the database work too complex.You can download the full listing here. I also did a couple of related searches. First up was a look at which VC firms had backed the most losers. It’s an interesting grouping, with some selection bias toward firms that do lots of deals. It goes like this:1.      JPMorgan Partners 2.      New Enterprise Associates 3.      Intel Capital 4.      Bessemer Venture Partners 5.      Oak Investment Partners 6.      Kleiner Perkins Caufield & Byers 7.      Sequoia Capital 8.      Mayfield Fund 9.      Windspeed Ventures 10.  BancBoston Ventures/BancBoston Capital In addition, I broke down the entire grouping by industry sector (using MoneyTree categories). It looks like this:1.      Telecom (19.96% in terms of dollars lost) 2.      Software (14.75%) 3.      Networking & Equipment (11.27%) 4.      Media & Entertainment (9.37%) 5.      IT Services (8.12%) 6.      Retailing/Distribution (5.59%) 7.      Consumer Products & Services (5.03%) 8.      Biz Products & Services (3.84%) 9.      Financial Services (3.44%) 10.  Medical Devices (3.03%) 11.  Industrial/Energy (3.02%) 12.  Semiconductors (3.01%) 13.  Healthcare Services (3%) 14.  Computers/Peripherals (2.63%) 15.  Biotech (2.62%) [...]

  • [...] * There was also another list created that used a different method, interestingly they looked at which companies were the biggest loosers, but counting the # of bust! [...]

Leave a Reply

PEHUB Community

Join the 12500 members of peHUB to make connections, share your opinion, and follow your favorite authors.

Join the Community

Look Who’s Tweeting

Psst! Got any hot tips?

  • This field is for validation purposes and should be left unchanged.

PE HUB News Briefs

RSS Feed Widget

Marketplace

VCJ Headlines (subscribers only)

RSS Feed Widget

Buyouts Headlines (subscribers only)

RSS Feed Widget

Reuters VC and PE feed

RSS Feed Widget