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

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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! [...]

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