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

Find new deal opportunities, super-charge your fundraising efforts and track top managers with VCJ. Get your FREE trial! Or subscribe now!