Dan Primack

A couple of months back, I moderated a venture capital panel at the Nantucket Conference, which is an invite-only gathering of technology entrepreneurs and investors. It was a great group, including Brad Feld (Foundry Group), Josh Kopelman (First Round Capital), Jo Tango (Kepha Partners) and Eric Hjerpe (now with Kepha, but an official free agent at the time). Highlights included each panelist telling which firm they'd join if their's didn't exist, Josh comparing troubled portfolio companies to train fires and Brad's argument that the survival of venture capital as an asset class is mostly irrelevant to his business. Conference organizer Scott Kirsner has sent over the audio for your listening pleasure, so apologies for all my uhhs, umms and slightly-manic opening:

Venture capital outperformance is correlated to a portfolio company’s distance from a a VC firm’s office, according to new research from The Harvard Business School. But not in the way you might think. Specifically, the paper found that VC firms based in San Francisco, Boston and New York generally return more money on investments outside of their local geographies than on investments close to home. This isn’t to say that such firms do badly on their local deals – a Palo Alto-based firm still does better on a typical Menlo Park deal than would a Cleveland-based firm – nor does it take into account organizational costs (travel, etc.). But, again, that Palo Alto-based firm will probably generate a higher return on a Cleveland-based portfolio company than on one based in Menlo Park. The paper suggests that this differential could be caused by VC firms using higher hurdle rates for long-distance deals. Such portfolio companies may require

Did you know that the National Association of Realtors has a venture capital arm called Second Century Ventures? Me neither, until I met managing director Constance Freeman (formerly of Cue Ball) at the Chicago Shindig on Monday night. Apparently the 1.2 million member organization first dabbled in VC by making one-off investments in companies like Move Inc. (online real estate), SentriLock (a realtor lockbox) and ZipLogix (real estate forms software). It then formed Second Century Ventures in 2007, and made an investment in commercial listings platform ePropertyData.

President Obama today will propose an overhaul of the financial regulatory system, and the WaPo has obtained an 85-page white paper that lays out the specifics. The net result will be three new federal bureaucracies (four created, one erased). More important to peHUB readers is the following paragraph: All advisers to hedge funds (and other private pools of capital, including private equity funds and venture capital funds) whose assets under management exceed some modest threshold should be required to register with the SEC under the Investment Advisers Act. All advisers should be required to report information on the funds they manage that is sufficient to address whether any fund poses a threat to financial stability. This certainly seems more aimed at hedgies than at PE and VC funds, but Obama also wants to defend against firms skirting the rules by just altering their self-described classification. In other words, a hedge fund can't suddenly call itself a VC fund, in order to avoid regulation. A byproduct is that there are unlikely to be different "modest threshold" of assets under management between the sub-sectors, which probably means most VC funds will actually be left out of the mix (assuming the threshold is in excess of one billion dollars).

Stratim Capital, a San Francisco-based direct secondaries firm, has acquired an equity stake in Linden Lab, maker of the Second Life virtual world, peHUB has learned. Details are scarce, except that the seller is not one of Linden Lab’s institutional investors. “It is true,” said Stratim managing partner Zach Abrams, when I called him for confirmation. “We bought almost the entire position of an existing shareholder... I don’t think this is a company that anyone will be able to put new money into, because it doesn’t look like it will need to raise another VC round.” Linden Lab has raised around $19 million in VC funding, from firms like Benchmark Capital, Catamount Ventures, Globespan Capital Partners and Omidyar Network.

Next Monday's peHUB Shindig in Chicago is now sold out, with a couple of hundred of you expected to attend. We may be able to open up a few additional tickets over the weekend, so send me an email if you'd like to get on the waiting list. As always, much thanks to our sponsors Bank of Ireland and Crowe Howarth...

Bloomberg reported earlier today that car-sharing service Zipcar is planning an IPO, based on an interview with company CEO Scott Griffith. A few hours later, TheDeal called Bloomberg's story "a gross misinterpretation" and "nonsense," based on a followup interview with Zipcar spokeswoman Nancy Scott Lyon. Specifically, TheDeal quotes Lyon as saying: "We did not announce an IPO and have no immediate plans to go public." But Bloomberg stuck by its story, telling telling Clusterstock that its interview with Griffith was on tape, and that he clearly said "2010" when asked about timing of a possible IPO. TheDeal also is holding firm, reiterating Lyon's quote in some back-and-forth Twitter posting (yes, this is pure new media hell). I've been unable to get Griffith or Lyon on the phone myself -- in part due to ZipCar's dysfunctional voicemail system -- so let me partake in some idle speculation...

The California Public Employees' Retirement System (CalPERS) yesterday made headlines for proposing an increase to its private equity allocation from 10% to 14 percent. A vote is scheduled for the pension fund’s board meeting next week. At first glance, the move seems to be a giant vote of confidence in private equity (venture, buyouts, etc.). But that gets tempered when one realizes that CalPERS is already at 13% exposure to the asset class, which makes the proposal look more like reactionary CYA prompted by the denominator effect. So which is it? According to sources close to the pension fund, it’s both. The allocation increase’s immediate affect would be to address the current exposure realities, but there also is a desire to “juice returns during the upcoming recovery.”

Connie last night posted a Q&A with economist/pundit Paul Kedrosky, who has released a paper arguing that the VC industry must shrink in line with the decreasing capital requirements of the startups they fund. Much of the blame for the buildup, Paul says, goes to limited partners – who have agitated for access to top-tier firms (or at least ones that used to be top-tier), and who jumped at the opportunity to invest when the firms' fund-sizes grew. Paul is certainly correct in his historical assessment – just look at Kleiner’s rapid growth – but I’m not so sure that LPs are going to help the VC industry rightsize/downsize. After all, for every new LP dollar committed to VC funds over the past few years, there have been a dozen LP dollars committed to buyout funds.

Jenny Hom last week resigned as chief investment officer of The Ohio Public Employees Retirement System, peHUB has learned. An OPERS spokeswoman confirmed the news, and sent over a formal statmenet that said, in part, that her decision was for “personal reasons.” Hom still had an active voicemail at OPERS as of earlier this afternoon, but emails […]