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Paul Carbone of Pritzker Group threw a bit of cold water on enthusiasm for co-investments in private equity, arguing that direct investments offer a better fit outside conventional fund structures, at least for family offices. . Family offices “like the asset class” but have run up against limited access to the best funds and other issues, said Carbone, managing partner at Chicago-based Pritzker Group Private Capital, at the PartnerConnect Midwest 2014 conference in June. . Citing a study by advisory firm Altius Associates released in March, Carbone said co-investments may contain a substantial risk of poor returns, even with a reasonably sized portfolio. While co-investments do avoid the conventional “2 and 20” fee structures of private equity funds, investors face “adverse selection” because they do not necessarily get access to the best deals. Their investment portfolios also become concentrated in too few investments, he said. . Direct investing is a superior strategy because it outperforms fund investments and significantly outperforms co-investments, he said. More than half of family offices with private equity holdings are taking part in direct investing and “more are interested,” he said. . --By Steve Gelsi, Senior Editor, Buyouts . A longer version of this story first appeared in Buyouts magazine. Subscribers can read the original version here. Not a subscriber? Click here to subscribe.
Technology industry icon Steve Case speaks about crowdfunding, entrepreneurship and what should guide the missions of the next generation of startup leaders at Thomson Reuters' Venture Alpha 2012 conference in San Francisco. Case is co-founder of America Online and chairman and CEO of Revolution, a Washington, D.C.-based investment firm he co-founded in 2005. Revolution's investment funds -- including Revolution Growth and Revolution Ventures -- have backed more than 30 companies, including Zipcar, LivingSocial, AddThis, Lolly Wolly Doodle, Bigcommerce and Echo360. . Video date: Oct. 18, 2012
Sponsored Video: Tom Angell, Principal-in-Charge, Rothstein Kass
New Enterprise Associates charges unusually low fees by venture industry standards but takes a higher-than-typical share of carried interest from returns on successful investments, Managing Director Peter Barris told attendees at Thomson Reuters’ PartnerConnect East 2013 conference in Boston in April 2013.   While emerging venture managers often make concessions on fees and carried interest, established players have a history of writing their own rules. Some charge fees above the industry-standard 2 percent. Others seek a share of carried interest greater than the industry norm of 20 percent. A few do both.   For New Enterprise Associates, known for raising some of the largest funds in the venture industry, it’s all about carry. For some time, the firm has made a practice of charging unusually low fees by venture industry standards and taking a higher-than-typical share of carried interest from returns on successful investments, Barris said.   Barris says the practice is meant to align interests of general and limited partners in the fund, with the message to LPs being that GPs won’t make big returns unless they do, too. Additionally, Barris says, NEA makes an effort, where feasible, to pay back fees, which it essentially sees as a loan.   That said, Barris did not recommend dipping below the 2% management fee or upping general partners’ share of carry as advisable for the venture industry at large. For smaller funds in particular, he said, the fee is necessary to cover the operational costs of running the firm. “When you’re an early stage firm, there’s a direct correlation between fees and the cost of operating the fund,” he says. Once you’ve been around longer, however, there’s more of a disconnect.   Overall, Barris says NEA’s long-term strategy has been to take an institutionalized approach to venture investing. While many firms build their reputation around high-profile partners and their compensation strategy around rewarding top performers, NEA pays its general partners the same amount. The idea, Barris says, is to create a culture in which “if I’m a GP, I care about someone else’s deal as much as I care about my own.”   The other notion behind the strategy is to establish NEA as a firm that can outlast the comings and goings of individual partners and operate on a large scale. The thinking there, Barris says, is that NEA’s partners have long believed the venture business is likely to go the way of other industries like banking, in which there are very large, full-service establishments and smaller boutique firms. Venture fundraising data from the last couple of years seems to support that idea, with a concentration of capital in the hands of a few large, established firms.   Another way the firm tries to institutionalize its operations, says Barris, is through its advisory board, which is made up of many of its largest LPs, as well as some independent advisors. The board functions much like one at a venture-backed company, he says. Every fall, for instance, the firm presents its budget to the board, outlining plans for spending on salaries, travel and other expenses.   While Barris didn’t point to any recent major changes in fund terms or firm processes, he did indicate a shift could be in the works if carried interest becomes taxed as income, as the federal government has long been considering. The current tax treatment of carried interest as capital gains, he said, definitely affects how fund terms are structured.   By Joanna Glasner   Note: This story first appeared on peHUB on April 8, 2013
Greylock Partners raised $1 billion for its 14th fund, making it the largest VC fund of 2013. Partner Joseph Ansanelli sat down with Venture Capital Journal (a peHUB sister publication) in December 2013 to talk about Greylock’s investment strategy. . He said he and his partners “spend a lot of time talking about success. Can this thing be 10 times better than the alternative?” . He also emphasized that venture firms cannot be afraid of failure. “Failure is actually a big big part of the process,” he said. ”We get thousands of business plans sent to us every single year. We invest in tens. Only a few of those actually blossom to become really big and successful companies.” . Read more about Greylock's fundraising here. . Video date: December 2013
The University of Texas Investment Management Co didn’t just stumble into Foundry Group, Spark Captital and Union Square Ventures, UTIMCO CEO and CIO Bruce Zimmerman says at PartnerConnect East 2014 in New York. . Video date: March 27, 2014
Founded in 2009, Google Ventures has already become a notable force in early-stage venture investing. With an annual fund allotment of $300 million, the team invests in startups from a variety of sectors. Google recently made investments in music service TuneIn, recommendations site Luvocracy and aircraft technology provider Airware. . Karim Faris, general partner of Google Ventures, leads the firm’s investments in enterprise software, big data and security. . Faris sat down for a video interview with Venture Capital Journal in May 2013, in which he talked more about his investment strategies. . Faris's portfolio companies include ClearStory Data, RetailMeNot and DocuSign. Faris, who used to be on Google’s M&A team, is not focused on finding companies that could be bought someday. Instead, Faris says Google Ventures enters an investment with “the mindset that we’re building a self-sustaining standalone company that has prospects of being a public company one day.” Faris says that strategy increases the odds of providing better returns for the investors and entrepreneurs. . Going forward, Faris says he is enthusiastic about enterprise software, an industry which has seen many successful IPOs as of late. Faris says enterprise software is “making things more accessible more usable and cheaper,” adding that the sector is “ripe for disruption.” . However, regardless of the investment, Faris, like other venture investors, says it ultimately comes down to backing the right team. When deciding whether an investment is worth it, he asks, “Is the problem that they’re solving an aspirin or a vitamin?” You’ll have to watch the video to find out what he means. . By Katie Roof, contributor, Venture Capital Journal . This story first appeared in Venture Capital Journal in June 2013
Sharing wisdom gleaned as a senior executive at HGGC after his years as a Super Bowl-winning quarterback for the San Francisco 49ers, Steve Young told private equity pros to huddle, embrace change and find out how good they could be at the PartnerConnect West conference Oct. 7, 2014.
David Cowan, a longtime partner with Bessemer Venture Partners, talks about Bessemer's culture and evolving strategy, including why partners believe scaling up is in the best long-term interests of its investors. Cowan spoke at Thomson Reuters' Venture Alpha West 2013 conference in Half Moon Bay, Calif. . Video date: Oct. 9, 2013
Jeffrey Goldfarb and Richard Beales of Reuters Breakingviews discuss Apple's purchase of Beats through the lens of "Andreessenomics." May 12, 2014.
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