Blog Roundup: Discussion of TechCrunch post on the decline in VC returns

TechCrunch Blog Post: Ten-Year Venture Capital Returns Continue To Slide

(Source: Cambridge Associates LLC via TechCrunch; The crude annotations are mine.)

Ouch.

There are lots of problems with this 8.4% 10-year rolling average return for venture capitalists in the US.

The big one, of course, is that when VC returns head into the 8% range, institutional investors who might otherwise plow an obligatory 1% into VC firms to cover their “alternative” category, start looking for less risky investments with similar return profiles.

And if those institutional investors start to go away, you end up with smaller VC funds and a big gap develops in the middle of your investment cycle, as it did  from 2001 to 2003 – between the seed investors involved in early rounds and the larger, later-stage VCs, private equity funds and strategic industry investors who might participate in later rounds.

Of course, this should be a temporary problem: This is a rolling average and low returns can’t last for much longer, can they?

Or can they? (more…)

Gale bought Questia Media last month… But why? Interesting analysis from InfoToday

Last month, Gale, a division of Cengage Learning, bought Questia Media, the company I co-founded in 1998.

But why did they buy it? This article from Information Today seems to analyze it pretty well:

Gale Reaches for More End Users With Questia Acquisition

A salient point from the article:

Barnes [Executive VP of Gale] says that HighBeam is doing very well, and with Questia, the services will reach some 30 million visitors per month. In addition to the synergies of HighBeam and Encyclopedia.com with Questia, Gale will look to integrate Questia with its AccessMyLibrary service (www.accessmylibrary.com), which connects users through web services to their local libraries for access to more than 30 million articles from premium sources. In December, Gale announced a free AccessMyLibrary mobile application for the iPhone.

OpenBeta3 PitchCamp Presentation: The Top 10 Unspoken Investor Questions…

Since we only had 15 minutes to do our educational presentation on Tuesday for participants in PitchCamp, prior to OpenBeta on Thursday, I decided to go a little lighter on my “Investment Criteria for Entrepreneurs” presentation…

Without further ado, we present “The Top 10 Unspoken Investor Questions…”

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Upcoming Talk: Investment Criteria for Entrepreneurs

I’ve been asked to speak at the upcoming OpenBeta3 event organized by the ExtendedBeta community.

I’ve been asked to talk about the investment criteria that angel investors, seed funds and venture capitalists use to evaluate investment in technology startups, and in the process I’ll be discussing the investment criteria I’ve developed during my investment career and that we currently use at Black Mesa Ventures.

This will be a part of PitchCamp, presented 24 hours before OpenBeta3 in preparation for the new 24HourPitch activity, which will be occurring during the event.

In the process of preparing my notes, I went back through some of my favorite posts on this topic and I’ve listed some posts and useful resources. Enjoy!

• Reid Hoffman’s TechCrunch post on this topic is one of my favorites: Reid Hoffman: My Rule of Three for Investing
• Some of the resources maintained by Garage.com are classics. Particularly check the articles on preparing an executive summary, preparing your presentation slides, and the articles “Ten Lies of Entrepreneurs” and “Ten Lies of Venture Capitalists.”
• When pitching your business, you will want to have prepared a “pitch deck”  – a set of slides to quickly communicate your investment proposition. Looking through other company’s slides is a great way to  think about what you need to say and how others have said it. Here’s a suggested format from i2E, the public-private commercialization non-profit for the State of Oklahoma.
• For later stage venture capital, the Murphree Venture Partners investment philosophy page conveys a lot of information very succinctly: http://www.murphreeventures.com/philosophy.htm

What Is Your Company Worth? Looking at EBITDA Multiples

Periodically, this is one of those things that executives in startup companies should think about: What are the current multiples on revenues and EBITDA in my industry and my niche?

These days, of course, this is one of those “cover your eyes, you don’t want to know” times in the market. But, periodically, you’ve got to look anyway.

If you don’t know what I’m talking about, don’t worry. I’ll explain.

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