Written for VC-backed entrepreneurs…
Congratulations!
Today is your day.
You’re off to Great Places!
You’re off and away!
Oh, the Mistakes You Will Make,
The Money you’ll Waste
Maybe Your are Moving
With much too much haste!
You have brains in your head.
You have feet in your shoes,
You can Steer yourself
Any Direction you choose
You have clouds in your head.
You have to take care,
Your burn rate’s outrageous!
You are in for a Big Scare
You are on your own
And You know what you know
And YOU are the guy
Who’ll decide where to go
Be Cautious, Be Bold
Lead the Charge up the Hill,
We’ve given you our cash,
Watch out for the ...
November 2nd, 2009 at 2:21 pm
If you look simplistically at “asset classes” and compare ten year performance of VCs to ten year performance of the DJIA, NASDAQ, or S&P, then you’re doing yourself a dis-service. For starters, most returns form 1999 to 2009 haven’t been great across the board.
If you were actually a bit more sophisticated, you would look at the VC asset class versus the broader PE asset class and also consider segmenting the various subclasses. For instance, how has early-stage VC fared versus mega LBO or late-stage VC? As importantly, how do fund sizes impact performance? Is there a correlation of fund sizes to returns? How does that correlation impact the concept of investing in historically top-ranked funds, which are now 2-5x as large as they were a decade ago?
I would argue that VC is still a very healthy asset class. But, like everything, past performance is not indicative of future results. Have you ever heard of that adage? Some believe that smaller, more nimble, newer fund managers are in the best position to generate strong returns in the overall PE market. Why? For starters, they’re not saddled with exuberant salaries, their firms are not laden with massive portfolios of ten year old companies, and fund sizes have them focused on making money from carry not from fees.