Dan Primack

Venture capital performance fell across all time horizons in the fourth quarter of 2008, according to data released this morning by the National Venture Capital Association and Thomson Reuters (publisher of peHUB). On the up-side, performance remained positive for all horizons three-years and out, with venture capital continuing to outperform public market indices -- including the Nasdaq and S&P 500 -- for all measured time periods. What's essential to realize, however, is that the most important time horizon is not five years, ten years or 20 years. Instead, it's nine years -- because that correlates to the end of the dotcom boom. We all know that VCs did gangbuster business between 1996 and 1999, but it's in 2000 when things began to go south. So we called up the Thomson Reuters data folks, and found out that the nine-year pooled IRR horizon is just 1.3 percent. For context, the 10-year return stands at 15.5 percent. Come January 1, long-term VC performance data will look very different…

HarbourVest Partners today announced that it has raised $2.9 billion for its seventh secondaries fund, named Dover VII. So we've got 5 questions for Harbourvest managing director Brett Gordon: 1. There has been lots of secondary capital raised over the past 24 months, and there obviously are a lot of interested sellers. But actual deal volume hasn’t seemed to correspond. Is it still a supply/demand gap, or more a chasm in buyer/seller price expectations. From the supply/demand imbalance perspective, I’d say that the supply of assets available for sale still far outstrips the demand, or capital raised to purchase assets. Not just by a little bit, but by a multiple, which dramatically favors the buyers and lets them be very selective. But you’re right that there is still a bit of an expectation gap between buyers and sellers. Part of that is driven by buyers’ underlying uncertainties over future portfolio company performance. We’re looking at assets and trying to predict what they’ll be worth in the short-term, mid-term and long-term. But how do you do that in today’s environment with any certainty? So you either offer to buy something at a very low price, or don’t offer anything at all.

Here's a handful of additional notes on the NY State Common Retirement Fund situation and, in particular, yesterday's decision by Comptroller DiNapoli to ban the future use of placement agents by firms requesting NYSCRF investments (find my initial take here): *** I want to stress that I am in no way attacking the integrity of the current NYSCRF private equity staff, whose morale right now must be lower than that of Montreal Canadiens fans (happy 100 years). In fact, I have to wonder if the lid would have been blown off this scandal earlier, if New York had some sort of whistleblower shield to protect them from ratting out their bosses. Kind of reminds me of the Ohio BWC situation, where good staffers got caught up in something not of their own doing. *** The ban extends beyond placement agents, but a NYSCRF spokesman says that it will not extend to things such as the use of a third-party data room or printing company. I'm supposed to be emailed the official guidelines later today, and will post them. From what I can tell, they are not yet on the NYSCRF website. *** If you are a PE firm that used a placement agent, but are already in the midst of being diligenced by NYSCF, you're okay (seems the ban comes with a grandfather clause). *** DiNapoli has hired outside consultants to review current policies and relationships, but the placement agent ban is not up for discussion.

If you can no longer use a placement agent to solicit investments from the New York State Common Retirement Fund (NYSCRF), then how do you go about doing it? I can't get an official answer yet, so I went to the pension's website for direction. Follow along: Go to the Treasurer's website: http://www.osc.state.ny.us/ Select "Pension Fund" on the left-hand nav bar, and scroll down to Investments Overview. Select Alternative Investments. The first thing that you'll see, in bold, is a contact name and email address. Only problem is that the name and address are for Nick Smirensky, who stopped working there SEVEN MONTHS AGO! Just to be sure Nick hadn't come back into the fold -- he left last October to become CIO of the New York State Health Foundation -- I shot him an email. It bounced back almost immediately, without any additional contact information for aspiring fund managers. Even worse, I actually brought this mistake to the attention of a NYSCRF spokesman over a month ago (which is why I thought to look again today). Oh competence, thy name is not NYSCRF...

In January, we reported that Atlas Venture had made several personnel moves in the wake of closing its eighth fund well below target. One of those was that Boston-based IT partner Eric Hjerpe would transition into a venture partner role. Such an arrangement didn’t last long, as Hjerpe left the firm altogether last week. No […]

When a public pension system commits capital to a private equity fund, it typically discloses several pieces of information. Things like commitment size, the fund's basic investment strategy and the fund's senior management. What's missing, however, is any detailed information on how the fund was sourced or diligenced. That's got to change, and quick. I'm not proposing a full proctology exam here, just a basic timeline. For example, who was the first person to approach the pension system about the investment opportunity? And who did that person approach? And so on... If that initial contact is between a "finder" and a member of a pension's board, disclose it. If the initial contact comes at a conference between a GP and a member of the pension's investment staff, disclose it. If the initial contact is between a GP and a pension system's designated consultant, disclose it. And then tell us how the process progressed from there.

It’s the end of April, which means that a bunch of first-year MBA candidates are freaking out about not having summer internships lined up yet. But we’re here to help, with our annual Desperate Interns Drive. This is a lot like the Internship Rodeo from November, except that it’s later in the game for both employers and employees. So if your firm or one of your portfolio companies is looking to hire summer interns from the current crop of first-year MBA candidates, please drop me a note at daniel.primack@thomsonreuters.com. All postings will be put into peHUB's password-protected MBA Forum section, and can include as much or little information as you’d like to provide. Minimums are firm type (VC, LBO, I-Bank, etc.) and job location. If you’d like to keep your firm identity anonymous, just be sure to let me know. There is no fee for this service. For context, MBA Forum currently has over 2,000 verified members.

Netscape co-founder Marc Andreessen and former Opsware exec Ben Horowitz are hoping to raise around $250 million for their debut venture capital fund, peHUB has learned. If you just heard a choking sound, it's probably coming from your own throat (or that of your closest LP). What I mean is that $250 million is an extraordinary amount of capital for a first-time, early-stage fund. Andreessen said in February that initial investments would average just $500,000 (a fivefold increase from the $100k that he and Horowitz currently invest out of their own pockets). That would work out to more than 100 portfolio companies, even if you assume that the fund would quadruple-down on every investment (which it won't). Andreesen and Horowitz plan to thin the bloated portfolio size by complimenting their seed deals with a handful of $5 million-ish Series A plays, but I'd think the firm would really need to average $10 million per company to make things manageable.

I am pleased to welcome Parish Capital as a co-sponsor of The LP Congress, which is taking place on June 9 at Bond Street in New York City. Our other co-sponsor is secondaries firm Coller Capital, and we're not planning on adding another. Looks like a strong attendee group so far, with registrants from public pensions, funds-of-funds, private foundations, endowments, family offices, etc. We're also adding some top-notch moderators for the working groups -- in addition to myself and Erin -- and I'll have details on that later this week. Remember, it's invite-only, but you can request an invite by emailing me with your name, place of work and job title.

Advertising behemouth WPP Group has filed suit against some of its fellow VC investors in Spot Runner, accusing them of running a "pump and dump" scheme that netted $54 million at the expense of WPP and other Spot Runner shareholders. Among the defendants are Battery Ventures and Index Ventures, plus Spot Runner's co-founders and former AOL president Bob Pittman. I haven't read through the entire complaint yet (it's posted after the jump), but here is an operative paragraph: "The defendants operated the company from its inception for their own benefit instead of the best interests of the company and its stockholders. Rather than working to make Spot Runner a successful and profitable venture, they perpetuated a "pump and dump" scheme in which they aggressively promoted the company to new investors (often by promoting that WPP was an investor in and supporter of the company) and then sold new investors large quantities of their own secondary shares at ever-increasing valuations. Such secondary sales were accomplished surreptitiously and without the disclosures to investors required by the controlling investor agreeemnts or the federal and state securities laws." Spot Runner is a Los Angeles-based Internet ad agency for local businesses. It has raised over $110 million