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Term Sheet — Friday, September 2

September 2, 2016, 2:43 PM UTC

Random Ramblings

I spent a decent portion of yesterday on Twitter, discussing venture capital fund performance, in the wake of a Wall Street Journal article that included ROI and IRR data on Andreessen Horowitz's first three funds. To me, the data itself was fascinating (nice get, Rolfe Winkler!), since it's the first time in a very long time that we've gotten a quantitative look at how Sand Hill Road's buzziest shop is doing. And for those who are allergic to clicks, here you go:

  • Fund I (2009): 2.6x ROI, 42% IRR
  • Fund II (2010): 2.3x ROI, 25% IRR
  • Fund III (2012): 1.7x ROI, 27% IRR

Obviously these are strong numbers, although the vast majority of those "returns" remain on paper. And LPs are apparently satisfied, given how little time it took Andreessen Horowitz to raise its fifth fund earlier this year (or many LPs are scared sheep, but that's a different conversation for a different day).

The WSJ story, however, wasn't quite so positive (although, obviously, it never said the numbers were bad). First, it used Cambridge Associates benchmarks to argue that only Andreessen's first fund was top 5%, while its second fund didn't even make top quartile. And then, just to stick in the knife a bit deeper, it used less detailed info to argue that the firm also is lagging rivals like Benchmark, Sequoia Capital and Founders Fund.

On the Cambridge Associates point, I say "meh." The average sample size for each of the three relevant vintage years is 44 funds, compared to the average of 187 U.S.-based VC funds raised in each of those years. So it's not a huge sample, and we know nothing about the identities of the included funds (including fund sizes, number of different managers, etc.).

As for comparing to the Sequoia fund with WhatsApp... well, yeah. That deal was LeBron block-level ridiculous. And, even without that beauty, Sequoia is consistently viewed by LPs are the single greatest venture capital firm out there (save for how it sometimes makes investors commit to side funds in order to get the flagship allocations they really want).

As for the other comparisons, I'll reserve judgment until we see actual distributions from big portfolio companies like Uber (Benchmark), Airbnb (Andreessen Horowitz) and SpaceX (Founders Fund). Not to mention from all other firms and portfolio companies in the venture universe. If Andreessen ends up top-decile, then even a low ranking in that rarefied stack is largely irrelevant. But if it falls lower -- particularly out of the top quartile -- then it will have some serious splainin to do (particularly given how it markets itself).

Late yesterday, Andreessen Horowitz published a detailed defense of its returns, focusing on how it uses a relatively conservative option-pricing model more common among growth equity and private equity firms than early-stage venture outfits. I've heard arguments that Andreessen Horowitz doth protest a bit too much, and I somewhat agree. On the other hand, I appreciate any and all transparency on such matters, plus the broader point that all carrying marks on VC portfolios are subjective until there is a distribution.

 Broader disclosure discussion: Some folks on Twitter also expressed surprise that this data isn't already public. After all, Andreessen Horowitz has raised money from some publicly-funded institutions like state school endowments.

For the uninitiated, precious few public institutions disclose fund-level performance data for their venture capital or private equity funds. In many cases, the institutions have lobbied state lawmakers for exempting statutes, by arguing that such disclosure will cause top fund managers to refuse allocations. Ironically, a lot of the blame here can be traced back to Sequoia Capital (yes, the firm whose returns are obscenely good), based its petty decision to boot some public LPs last decade over performance disclosure risks. For example, we used to be able to get data from Michigan. Not anymore, however. And even some institutions that are required to disclose use such a long lag that, once the reports are published, they are largely meaningless (hi, UC Regents).

However, I have collected a group of publicly-available venture capital and private equity performance reports (some which I had to request via email), and published them on the website. Check out all the docs by going here.

And if you would like to publicly share your firm's returns -- or you're an LP who thinks all of this secrecy is silly and/or counterproductive -- feel free to send me an email at If confidentiality is desired, it's yours...

 Deal updates: Yesterday's edition noted that C3 IoT, a full-stack IoT development platform founded by by Thomas Siebel, had raised an undisclosed amount of equity funding from TPG Growth. We've since learned that the deal was for $70 million. Also, Wednesday's VC deals section reported that online real estate platform raised $75 million in Series D funding led by Wellington Management. We've since learned that the post-money valuation was approximately $1 billion.

 Publishing note: Term Sheet is off on Monday for the Labor Day holiday. We will return to our regularly-scheduled ramblings on Tuesday. Have a great long weekend..


 Thoma Bravo is in talks to acquire the software unit of Hewlett Packard Enterprise (NYSE: HPE) for between $8 billion and $10 billion, according to Reuters. Goldman Sachs is managing the process, which reportedly has seen interest from Vista Equity, The Carlyle Group and TPG Capital. Read more.


 Boku, a San Francisco direct carrier billing mobile payments company, has raised $13.75 million in new VC funding. Return backers include Khosla Ventures, Benchmark Capital, NEA, Index Ventures and DAG Ventures.

 Beyond Verbal, an Israeli developer of voice-driven emotions analytics, has raised $3 million in Series A funding. KuangChi Science Ltd. led the round, and was joined by Winnovation and Singulariteam.

 Criquet Shirts, an Austin, Texas-based men’s clothing startup, has raised $1.4 million in Series A funding led by CircleUp.


 Actis has made a “significant investment” in Medis Group, a branded generic pharmaceuticals business in Tunisia and Algeria. Sellers include Africinvest.

 BJG Electronics Inc., a Ronkonkoma, N.Y.-based interconnect distributor to military and aviation OEMs, has raised an undisclosed amount of private equity funding from Rockwood Equity Partners.

 The Carlyle Group is teaming with CITIC Group to bid on McDonald’s (NYSE: MCD) restaurants in China and Hong Kong, according to Reuters. A rival bid is expected from TPG Capital, which is working with Beijing Capital. Strategic suitors for the deal, which could be valued at between $2 billion and $3 billion, reportedly include China Cinda Asset Management, Sanpower Group and Beijing Tourism Group. Read more.

 Crestview Partners has agreed to acquire Accuride Corp. (NYSE: ACW), an Evansville, Ind.-based provider of components to the North American and European commercial vehicle industries. The deal is valued at $424 million ($124m of equity value), or $2.58 per share (55% premium over yesterday’s closing price).

 Hewlett Packard Enterprise (NYSE: HPE) has sold its 21% equity stake in India-listed IT services provider Mphasis Ltd. to The Blackstone Group for approximately $825 million. As part of the deal, HPE renewed its existing master services agreement with Mpahsis.

 KKR has completed its previously-announced acquisition of Epicor Software Corp., an Austin, Texas-based provider of sales and supply chain management software, from Apax Partners. No financial terms were disclosed.

 KKR is no longer in talks to acquire South Korean hypermarket chain Kim’s Club from E-Land Group, due to a dispute over price. Read more.

 NewQuest Capital Partners has acquired Integreon Inc., a Los Angeles-based provider of outsourced legal, document, research and business services, from Actis and Livelt Investments. No financial terms were disclosed.

 The Riverside Company has acquired European Panel Co., a France-based maker of panels for overhead doors in the residential, commercial and industrial markets. No financial terms were disclosed.

 Tilley Capital has sponsored a recapitalization of Electromedical Products International Inc., a Mineral Wells, Texas-based maker of a handheld device used to treat anxiety, insomnia, depression, and pain. No financial terms were disclosed. Generational Equity advised EPI on the transaction, which closed June 30.

 TPG Capital has held preliminary discussions with about purchasing security software group McAfee from Intel Corp., according to Bloomberg. Other private equity firms that had shown early interest, including Permira and Thoma Bravo, reportedly are no longer pursuing the deal, which could value McAfee at upwards of $3 billion. Read more.

 Trescal, a French calibration services company owned by Ardian, has acquired Precision Metrology Inc., a Milwaukee-based calibration services provider whose shareholders include JPB Capital Partners. No financial terms were disclosed.

 Vestar Capital Partners has completed its previously-announced $3.6 billion sale of The Sun Products Co., a Wilton, Conn.-based maker of laundry and household brands like Wisk and Snuggle, to Germany's Henkel

 Yum Brands (NYSE: YUM) is selling a stake in its Chinese operations to Primavera Capital and Ant Financial (a unit of Alibaba Group) for $460 million ($410m and $50m, respectively). The deal is expected to close on October 31, in conjunction with a spinoff of the business. Read more.


 There is no IPO news this morning.


 Parthenon Capital Partners is seeking a buyer for Bracket, a Wayne, Penn.-based clinical trial specialty services provider, according to Dow Jones.


 E-Land Group, a South Korean apparel and retail company, has agreed to sell its Teenie Weenie youth fashion brand to China’s V-Grass Fashion Co. for nearly $900 million. Read more.

 Haynes and Boone, a Dallas-based corporate law firm, has completed its previously-announced merger with London-based Curtis Davis Garrard. The combined firm will be called Haynes and Boone CDG in the UK, and Haynes and Boone in the U.S.


 No firm or fund news this morning.


 Ryan Goldenberg has joined private equity firm LLR Partners as a vice president focused on financial services investments. He previously was part of the growth equity practice at Houlihan Lokey.

 Steve Loughlin has joined venture firm Accel as a partner. He previously was CEO of SalesforceIQ.

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