Dan Primack

GrandBanks Capital has quietly held an $85 million first close on its second fund, which is targeting $150 million. The Newton, Mass.-based firm focuses on early-stage investments in the software and services space, and previously raised $125 million for its debut vehicle in 2000. Deals from that fund include Colubris Networks (sold to HP last […]

Bessemer Venture Partners this morning announced "the closing of a $350 million supplement to its current fund." But that's not really true. At least not in the traditional sense. The fund in question is Bessemer Venture Partners VII, which closed in June 2007 with approximately $1.1 billion in capital commitments. It was the first BVP fund open to institutions other than family office Bessemer Securities, although BS still took a very large stake. Too large a stake, perhaps, as the new "supplement" is mostly a transfer of unfunded capital from Bessemer Securities to other limited partners.

As expected (by peHUB at least), President Obama's proposed fiscal 2010 budget includes a provision to reclassify the tax treatment of carried interest, from capital gains to ordinary income. This would dramatically increase the taxes paid on profits by buyout firms, venture capital firms, hedge funds and any other investment partnership (real estate, timber, oil, etc.). The basic math is that this change would raise a PE firm's taxes on investment profit from 15% (current cap gains rate) to around 35% (ordinary income level for top brackets). That's a big jump, although it's worth noting that capital gains rates themselves are universally expected to rise to at least 20 percent. As I've written ad nauseum, this is a change I support. Carried interest is, at its heart, a fee for services. A buyout pro or VC should not receive capital gains treatment on take-home generated by investing someone else's money. The limited partner is the person or institution that took the capital risk, so it's the one deserving of the capital gains rate (and would continue to receive it under Obama's plan). If a buyout pro or VC contributed

There has been lots of back-and-forth this week about how venture capitalists are "paralyzed," or at least how seed-stage companies are starving for dollars (more than usual, that is). Some of this has played out in the NYT and WSJ editorial pages, some has played out in the VC blogosphere and some has played out in my inbox. So I figured it was worth uploading some MoneyTree data runs, in order that we may all argue with a common set of numbers. Each run includes the years 1995-2008, and only relates to investments in U.S.-based companies. For context, Yahoo was first funded in 1995, eBay and SalesForce.com in 1997, Google in 1999, EqualLogic in 2001 and Facebook in 2005. The spreadsheets can be found below, as can three quick (and surprising) takeaways...

The morning after Barack Obama was elected president, I wrote that the debate over carried interest taxation was effectively over. Obama had promised on the campaign trail to change the treatment of carried interest from capital gains to ordinary income -- which in most cases would raise the rate from 15% to 35 percent – and I saw little chance that he’d go back on that word. I also assumed that most people agreed with me, until the following exchange with NVCA chief Mark Heesen, during a 5 Questions here at peHUB: Dan: One of your big issues over the past two years has been tax treatment of carried interest. Is that still a big priority? Mark: I think it continues to be an issue, but you were dead wrong when, the day after the election, you basically said that a change to the carried interest tax was fait accompli. We got lots of calls after that column, saying “Oh my God.” We knew it wasn’t going to happen at that point. You’ll see it brought up again, but in this environment it’s very unlikely you’ll see Congress working on issues that are not huge revenue-raisers. They will not be out there trying to slap the wrists of people they shouldn’t be slapping the wrists of, because there are more important issues to work on at this point. Well, today's Wall Street Journal reports that Obama will indeed include the carried interest tax change as part of the budget blueprint being unveiled later this week.

I respect Tom Friedman. Hell, I envy him. But the man has taken temporary leave of his senses, by repeatedly arguing that some sort of venture capital bailout is in order. First, he penned a piece arguing that VC-backed cleantech companies were "dying like flies," due to a lack of capital. I’ve repeatedly written about the lack of project finance for the handful of VC-backed startups that need it (mostly facility-heavy electric vehicle and biofuel producers), but Friedman vastly overstates the problem. Moreover, he fails to note that a number of firms rushing in to fill the void, including Blackstone, C Change, CMEA and Kleiner Perkins. Then came a follow-up column, in which he wrote:

Réal Desrochers has resigned as head of alternative investments for the California State Teachers' Retirement System (CalSTRS), according to a source familiar with the situation. CalSTRS is expected to make a formal announcement later today. Desrochers joined CalSTRS in 1998, after having managed a global private equity portfolio for CDP Capital. The system currently has around $17.1 billion in private equity assets under management, which represents a 14.3% exposure (compared to a 9% target). "Réal had been planning his departure for some time but he kept it close to his vest until very recently," says the source, who adds that Desrochers' "contributions to the private equity program at CalSTRS have been immense."

Anonymous VC writes: "A comfort capitalist is a venture capitalist who has no idea what to do in the downturn. His true colors of not knowing anything -- or having never done anything -- are now revealed and cannot help companies plan through the mess. He is too scared to take a venture into a new deal. Instead, the comfort capitalist renews his roots by attending more conferences, VC gigs, open coffees and a "how to" course in looking very busy."

Add Appian Ventures to the (growing) list of venture capital firms that do not expect to add new portfolio companies in 2009. Chris Onan, a partner with Denver-based Appian, says that the firm simply needs to reserve remaining dry powder to support its 18 existing portfolio companies. At the same time, Appian doesn't want to begin raising a new fund without a few more exits under its belt.

Want an illustration of the dreaded denominator effect? Just take a look at some new numbers from the Pennsylvania Public Employees’ Retirement System (PERS), which last week released its 2009 Supplemental Budget Information. It shows that PERS had a 24.2% exposure to alternative investments at of the end of 2008. This compares to just a 15.6% exposure to alternatives at the end of 2007 (which was already higher than the system’s 14% target allocation). We asked PERS spokesman Robert Gentzel about the situation, and he replied: "As you noted, the current actual allocation is well above the target. Until it is brought more into line over time, we would expect few, if any, further commitments." The PERS document also includes details of fees paid to VC and buyout managers last year, and some fund-specific cash in/cash out information. We’ve posted it all here, in .pdf form (we wanted to use Scribd, but it seems SERS encrypted the file).