Comments on: The Law of Large Numbers http://larrycheng.com/2009/11/09/the-law-of-large-numbers/ Some thoughts on VC, some on tech, and some on other stuff. Thu, 17 May 2012 23:16:10 +0000 hourly 1 http://wordpress.com/ By: Why Growth Equity Is The Best Risk/Reward in Private Equity « Thinking About Thinking http://larrycheng.com/2009/11/09/the-law-of-large-numbers/#comment-2514 Sat, 17 Apr 2010 18:43:26 +0000 http://larrycheng.wordpress.com/2009/11/09/the-law-of-large-numbers/#comment-2514 [...] I mean traditional early stage venture capital.  Firstly, the large venture funds run into the law of large numbers – no matter how good you are, turning a good multiple on a large fund is hard especially when [...]

]]> By: James http://larrycheng.com/2009/11/09/the-law-of-large-numbers/#comment-1562 Thu, 21 Jan 2010 17:59:42 +0000 http://larrycheng.wordpress.com/2009/11/09/the-law-of-large-numbers/#comment-1562 btw…those returns are PATHETIC esp over 10 years.

]]> By: Do Venture Capitalists care about innovation? « My Thoughts on Technology, Management, … http://larrycheng.com/2009/11/09/the-law-of-large-numbers/#comment-1372 Thu, 10 Dec 2009 16:00:25 +0000 http://larrycheng.wordpress.com/2009/11/09/the-law-of-large-numbers/#comment-1372 [...] article on the funding start-ups have received in the last year – Larry Cheng has a blog post explaining the financials. The fictional small VC firm made a better cash on cash return for its LPs through one winner, than [...]

]]> By: larrycheng http://larrycheng.com/2009/11/09/the-law-of-large-numbers/#comment-1286 Thu, 12 Nov 2009 14:12:28 +0000 http://larrycheng.wordpress.com/2009/11/09/the-law-of-large-numbers/#comment-1286 Ken – that is the point. I’m actually a big fan of VC and if returns were published, we’d see a number of smaller funds doing really well. The double whammy on the large funds is they got to be large because they were successful. And because they are successful, they charge more. So, not only are they fighting the law of large numbers, but also fighting netting out larger fees. Some will succeed even with a large fund, but it’s incredibly hard.

]]> By: larrycheng http://larrycheng.com/2009/11/09/the-law-of-large-numbers/#comment-1285 Thu, 12 Nov 2009 14:10:45 +0000 http://larrycheng.wordpress.com/2009/11/09/the-law-of-large-numbers/#comment-1285 Adam, I’m a big fan of where Openview is going. I think your firm is situated beautifully based on some of the systemic structure issues in VC (like the law of large numbers).

]]> By: larrycheng http://larrycheng.com/2009/11/09/the-law-of-large-numbers/#comment-1284 Thu, 12 Nov 2009 14:09:41 +0000 http://larrycheng.wordpress.com/2009/11/09/the-law-of-large-numbers/#comment-1284 Jim – thanks for the comment. How could I forget about Gomez? I guess I started with an incomplete list and ended with an incomplete list. It wouldn’t change the end result materially, but that’s beside the point. Thanks for pointing it out.

Also interesting point on the acquirers. Intuit, Cisco, now Google are all active. We hear all the big buyers are in serious shopping mode right now.

]]> By: Ken Wallace http://larrycheng.com/2009/11/09/the-law-of-large-numbers/#comment-1265 Thu, 12 Nov 2009 02:19:26 +0000 http://larrycheng.wordpress.com/2009/11/09/the-law-of-large-numbers/#comment-1265 Exactly! Venture isn’t broken per se, but venture investing out of a large fund is. Good stuff.

]]> By: Jim Sanger http://larrycheng.com/2009/11/09/the-law-of-large-numbers/#comment-1264 Wed, 11 Nov 2009 23:15:12 +0000 http://larrycheng.wordpress.com/2009/11/09/the-law-of-large-numbers/#comment-1264 Larry
The economics you mention makes me glad that my firm decided to keep to a modest fund size.

BTW, Evalve had an additional earnout of up to $90m on top of the $320m mentioned in the WSJ/Venturesource list.

Compuware’s acquisition of Gomez (over in Lexington) also closed on Monday of this week for $295m, all cash, no earnout. The Gomez acquisition didn’t get all that much coverage in the VC press, but was still one of the Boston area’s best recent venture-backed exits (along with BBN Tech, RueLaLa, Starent, and A123).

And among those in the “announced but not closed” category I guess one has to include yesterday’s announced acquisition of LifeSize by Logitech for $405m.

Does seem like the exit window for venture-backed companies is creeping open again.

On the other hand, it is interesting to note just how many of these top deals were done by the same *very* small cluster of acquisitive buyers. Medtronic did 3 (Ablation Frontiers, Corevalve, Ventor), Abbott 2 (Evalve and Visiogen), Intuit 2 (Mint and PayCycle), Cisco 2 (Pure and Starent), etc.

-Jim

]]> By: Adam http://larrycheng.com/2009/11/09/the-law-of-large-numbers/#comment-1263 Wed, 11 Nov 2009 17:14:55 +0000 http://larrycheng.wordpress.com/2009/11/09/the-law-of-large-numbers/#comment-1263 You are correct sir.

Here are two posts from Josh Kopelman at First Round highlighting the same issue.
http://redeye.firstround.com/

]]> By: larrycheng http://larrycheng.com/2009/11/09/the-law-of-large-numbers/#comment-1260 Tue, 10 Nov 2009 16:23:18 +0000 http://larrycheng.wordpress.com/2009/11/09/the-law-of-large-numbers/#comment-1260 I figure Omniture was public for quite awhile before being acquired, so I didn’t count it. VCs could have cashed out. So, I didn’t include any public companies just to keep the analysis simple.

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