

522 exits of VC-backed companies in 2011, total: $53.2bn - speedracr
http://techcrunch.com/2012/01/03/report-522-exits-of-venture-backed-companies-netted-53-2-billion-in-2011/

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jpdoctor
Forget the exits. The bigger problem is that the VCs were not earning their
keep: (2010) <http://hbr.org/2010/07/the-vc-shakeout/ar/1>

10-year IRRs are negative during the period that Google went public! The
customers of the VCs (primarily pensions and endowments) are beginning to look
with jaundiced eyes...

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vm
10 year returns across the Nasdaq Composite and S&P500 were garbage during
that time. It's not just VCs. Everything is correlated.

S&P: -20% (2000-2009), -3& (2001-2010) Nasdaq: -40% (2000-2009), +4%
(2001-2010) (google finance)

~~~
jpdoctor
> _10 year returns across the Nasdaq Composite and S &P500 were garbage during
> that time. It's not just VCs. Everything is correlated._

That's the problem: They are not supposed to be, or certainly not a
coefficient of 1. So the portfolio managers are wondering, Why the hell am I
paying 2 & 20 for something I can get in an index?

~~~
doyoulikeworms
Truthfully, why does anyone buy any particular asset expecting to do better
than the market? The short answer, I think, is that they perceive the
information and access that they have to be relatively great enough (than
other market actors) to eek out an edge over the market. People's perceptions
aren't always right, and the very definition of recessions (something that
happened once or twice in the last "decade") is that entrepreneurs make a
cluster of errors all at once.

As for the "why," I'm sure a particular's VC's perception of a startup
investment falls favorably on their own risk-reward scale, and is perceived to
be in line with the time horizon for their investment (whatever that may be).
To believe them or not is up to you, and is the result of your own perceptions
given the information available.

~~~
jpdoctor
> _Truthfully, why does anyone buy any particular asset expecting to do better
> than the market?_

The portfolio managers do not. They want a basket of assets, ideally with an
expectation value and standard deviation.

Read up on Modern Portfolio Theory, which is a typical entry point on
portfolio management, if you are curious why _expecting to do better than the
market_ is irrelevant. (Despite the name, MPT is not very modern.)

Edit: Note also, when I said portfolio manager above, I meant the customers of
the VCs, not the VCs themselves.

~~~
doyoulikeworms
I think we're on the same page on this one. I was mostly trying to explain
this sort of behavior based on the (semi-)efficient market hypothesis, and its
implications.

VC's (and their customers) tend to portend some sort of knowledge that a
sufficient portion of other market actors are unaware of, or are unable to act
on. If you (a VC customer) believe the VC, and perceive his reasoning to be
correct, that's all fine and good. Don't expect to win every time, though,
which I guess was the point of this thread.

That said, thanks for pointing my direction to the MPT!

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vm
This significantly understates the numbers because it doesn't include
secondary transactions, which are increasingly common for founders and early
investors.

This was most interesting: the median acquisition price is now $71M (up 77%)
with 5.3 years to liquidity. Takes lots of time but potentially incredibly
lucrative

The original release has better data:
[http://www.dowjones.com/pressroom/releases/2011/01032012-VCE...](http://www.dowjones.com/pressroom/releases/2011/01032012-VCExits-0172.asp)

~~~
cperciva
Did you really just say that 5.3 years is a long time?

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scottkduncan
It's interesting to see a decline in the total value of deals in Q4, despite
the fact that both Groupon and Zynga had their IPOs in that quarter. I wonder
whether there's any seasonality that typically affects these transactions or
whether there was a bit of a slowdown from the previous few quarters.

It's also interesting that only $5.4 billion, or roughly 10% of the total
value of deals, came from IPOs during the year. For all the attention IPOs
get, most of the money is coming from somewhere else.

