A History of Venture Capital

Service des relations industrielles (SRI) EPFL
A History of Venture Capital

Herv Lebret February 2009 and December 2011
Venture Capital is a uniquely American process, whose specialty is to combine risk capital with entrepreneurial management and advanced technology to create new products, new companies and new wealth
from The New Venturers, Inside the HighStakes World of Venture Capital, by John W. Wilson (Addison Wesley, 1984)
The Ancestors pre - 1958
1957 The Traitorous 8
The eight men were Julius Blank, Victor Grinich, Jean Hoerni, Eugene Kleiner, Jay Last, Gordon Moore, Robert Noyce and Sheldon Roberts.
Shockley was so difficult with his colleagues that 8 left Shockley Labs. to create a new company
1957 Arthur Rock
Arthur Rock, a banker on the East Coast, is contacted to help them raising $1.5M; an amount he will find in the person of Sherman Fairchild, the largest individual shareholder of IBM and owner of Fairchild Camera. In 1957, Fairchild Semiconductor is founded.
There had been also

ARD DGA
Georges Doriot (a Harvard professor) founded American R&D in 1946 in Boston.
William Draper II (VP Dillon Read), Rowan Gaither (founder of Rand Corp.) and Frederick Anderson (retired general) launch DGA with Rockfeller Group money in 1958
and also hobby of the rich

Laurence Rockfeller was interested in science and technology and less in his family business. He assembled a team of advisers, backed many entrepreneurs. In 1969, he structured a $7.5M fund into Venrock Associates.
Founded as the one of the first private equity firms in 1946 by "Jock" Whitney, J.H. Whitney & Co. provided capital and professional assistance to entrepreneurs.
He invested in MinuteMaid, Memorex, Genera Signals but also in movies (Gone with the Wind) He coined the term venture capital.
The Ancestors investments
Fairchild Semiconductor was very successful and reached 12,000 employees but the founders were bought back their shares by Fairchild they still became wealthy. Faichild bought back for $2.4M the stake of the 8 founders. ARD financed High Voltage (a $1.8M return for a $200k investment) and Digital Equipment in 1957 (a $70k inv. worth $355M after 14 years). ARD stopped in 1972. ARD biggest flaw was no incentive for associates (no carried interest).
DGA seems to have been less successful though and closed in 1969 when Rockefeller withdrew.
The First Generation Part 1 1958-1965
The First Generation

1961 - Davis & Rock
Davis joined Rock. They raised $3.5M with Moore, Noyce, Kleiner among others
Tommy Davis, a Harvard-educated lawyer and then vice president of Kern County Land Company. Davis wanted to leave the Land Company because it had little interest in high-technology investments though Davis had already made a successful investment in the high-technology firm, Watkins-Johnson.
1962 Draper and Johnson
Bill Draper III who was working since 1958 with his father at DGA and Pitch Johnson (a former Doriot student) launch the Draper & Johnson investment company
And also
Reid Dennis, Don Lucas
Reid Dennis goes back to 1961 to remember the time he persuaded his then-employer to make its first venture capital investment, although the Fireman's Fund Insurance finance committee didn't call it venture capital. It was a "special situation."
Don Lucas a General Partner at DGA will help in the restart of National in 1967; at that time, he has already left DGA to invest on his own. The Group is an informal group of individual investors including Dennis, but also John Bryan, Bill Edwards and others
The government got interested
The Small Business Investment Act was proposed in 1950 and signed in 1958! It gave tax breaks to private investment companies. By the end of 1961, they were 500 SBICs. Despite its flaws (dependant on govt. loans), the SBIC program fueled the creation of todays venture capital industry. Frank Chambers created the 1st SBIC in Northern California, Continental, in June 1959 with $5.5M which returned $90M until 1980.
Some 1st gen. investments

Davis & Rock
After Fairchild, Rock invested $1.8M for 25% of Teledyne founded by Henry Singleton. In 1984, Teledyne was worth $3B Rock & Davis $3.5M fund (from individuals) returned $100M. It invested in Scientific Data Systems (SDS), a company founded by Max Palesky. They invested $257k in a $1M round for 80% of the company. SDS proposed to used solid state technology to build computers although Rock and Davis would have never thought to invest in computers where IBM was tough to beat. By 1968, SDS was twice the size of Digital with $100M in sales. Xerox bought it for $1B to compete against IBM and the pay off to D&R was $60M, a 233x multiple. Davis & Rock 20% carried interest was at least $16M. Later Rock would invest in Intel when Moore and Gordon left Fairchild. Rock put $300k, Palevsky $300k, Gordon & Moore $500k for a total of $2.5M (fund raising was done in a few days) even if one of Rocks investors advised him against investing in memory technologies. Rock was chairman until 1975.

1961-1965
Continental (Chambers) put $250k in Dataproducts, which returned $12M. Then he invested in ROLM, American Microsystems and KLA. He closed his SBIC in 1980 to created a $22M VC fund. One member of the Group, Dennis, investment was $1020k? in Ampex which will be worth $1M in the end. The Group provided $4.5M to Linear and 2/3 of $7.7M to Sierra Semiconductor.
Draper&Johnson invested in Tandem
Fireman's Fund Insurance invested $1 million in an optical-character recognition company, Recognition Technology. At the height of the market, that investment was worth over $40 million, which, in the 1960s was an outstanding performance. By the time it was all over, Fireman's probably realized a $15 million or $16 million profit on the investment.
Don Lucas invested in the restart of National. Much later, he invested in SDA (Cadence) and Oracle. He also seems to have been a mentor to Costello and Ellison, 2 famous entrepreneurs.
The First Generation Part 2 1965-1972
1965 Sutter Hill, AMC

Johnson and Draper go on their own: Johnson launches AMC - the Asset Management Company (still active)
Draper launches Sutter Hill with Paul Wythes (also still in business) and acquires the assets of J&D. Bill Draper will have a long career and will also launch Draper International in 1996 and Draper India in 2001.
1969 Mayfield, Venrock
Tommy Davis leaves Rock to create Mayfield with Wally Davis (no family relation). First fund of $3.8M returned $13M in 1983. Mayfield has always been closed to Stanford (even if informal) Rock may have helped in the creation of Venrock, the Venture arm of Rockefeller. Arthur Rock with partner Dick Kramlich raised $10M, invested $6.5M and returned $30M. Then he went on his own and still does with A. Rock and Co. Rock became the VC icon (Time Front Page in 1984). Rock $57k in Apple worth $14M
1970 Palo Alto Investments
Jack Melchor (ex-Sylvania) who had founded MEL Labs in 1956 and HP Associates and Burt McMurtry after 10 years at Sylvania found together Palo Alto Investments
The company will return $100M out of $3.3M in investments like Rolm, Triad,
Their success story is famous: 4 inexperienced engineers from Rice and Stanford (Richeson, Oshman, Loewenstern & Maxfield), less than 32 year-old, were looking for money for a computer company. Rock declined and even Melchor who loved to gamble was skeptical. Melchor put $15k of angel money, then PAI led a round at $0.16/share. IBM bought ROLM at $70/share.

1965-70 - Boston
Willian Elfers leaves ARD as Doriot does not let control and creates Greylock with Daniel Gregory and Charles Waite.
W. Efers
C.Waite
(From left to right) Howard E. Cox, Jr., Charles P. Waite, Henry F. McCance, Daniel S. Gregory, William Elfers.

1965-70 - Boston
ARD alumnus Peter Brooke (then at FNB Boston) launches TA Associates in 1968 as a division of Tucker Anthony, a regional investment bank.
ARD alumnus Willian Burnes co-founds Charles River Venture in 1970 with John Carter.

1965-1972
The Giants 1972-1978
Kleiner Perkins
1972
Thomas Perkins
Eugene Kleiner
Tom Perkins (HP) and Gene Kleiner (Fairchild) raise together their first fund in 1972.
They consider themselves as the first VCs with an industry and entrepreneur background
KP first fund
1972
$7M fund with $4M from Hilman (Wilmington), $1M from Rockefeller University. Both Kleiner and Perkins put $150k each.
Tandem ($152M) Genentech ($47M)
KP First Fund (1972-1984)

$16'000'000 $14'000'000 $12'000'000 $10'000'000 $8'000'000 $6'000'000 $4'000'000 $2'000'000 $0
qu ip m e An nt A t Co Ap nt e ekn rp pl x I a I . ie nd nc d M ust . N at rie O ov e ffi ac Dy ria s ce o n l C r M ast Inc om e or . m d ic In un a l c . Sp ica Co Am e e tio rp er ch i c T Qu ns . an ec m In At hn e C c . hl ol o o et ic gy rp. Ta Sh Co nd o r em C e C p. e Co tus o rp m C . o p Am ute rp. rs G dah I n en l C c. En e v i C nte orp ro o . c An D l lag h In d r ev e en c . os lo C An pm o rp a l en . yz t er Co s In . c.
Cost ($)
Value on June 30,1984
More on http://www.startup-book.com/2009/02/09/about-kleiner-perkins-first-fund-episode-3
Ad va nc ed
ec re at io n
Sequoia
1972
Don Valentine, a co-founder of National and Fairchild marketing director creates in 1972 the VC arm of the Capital Group, later named Sequoia.
About valuation When people come as a team (usually it is three or four people and typically heavyweight on engineering), it is a complex process. But I think all of us have seen it in the earlier days, times when I can remember saying, "Well, look, we'll put up all the money, you put up all the blood, sweat and tears and we'll split the company", this with the founders. Then if we have to hire more people, we'll all come down evenly, it will be kind of a 50/50 arrangement. Well, as this bubble got bigger and bigger, you know, they were coming and saying, "Well, you know, we'll give you, for all the money, 5 percent, 10 percent of the deal." And, you know, that it's a supply and demand thing. It's gone back the other way now. But, in starting with a team, it's a typical thing to say, well, somewhere 40 to 60 percent, to divide it now. If they've got the best thing since sliced bread and you think they have it and they think they have it, you know, then you'll probably lose the deal because one of these guys will grab it. Transcript of oral panel the Pioneers of Venture Capital September 2002
More on http://www.startup-book.com/2010/11/05/when-valentine-was-talking
Sequoia
1972
Sequoia at that time called Capital Management Services and got money from the Capital Group (Michael Shanahan) in Los Angeles. Capital had funded AMD in 1968. Valentine invested $600000 in Atari in 1975. Mayfield and Time Inc matched the $600k and Fidelity added $300k in a $2.1M round. They got a 4x multiple when Warner bought Atari for $28M in 1976. Founder, Nolan Bushnell, got $15M.
Valentine met Steve Jobs at Atari. Jobs and his friend Wozniak built a low-cost computer. Valentine was reluctant to invest in two very junior engineers. He introduce them to Markkula, a marketing person from Fairchild and Intel.
Venrock ended up investing but Valentine added $200k which he sold for $6M in a private placement before the IPO. Sequoia also invested in Printonix (Printers), Tandon and Priam (Disk drives) and Dysan (Magnetic Media). Valentine estimates he made about 12 computer-related deals. Sequoia distributed $120M, a 17x multiple.
Kleiner Perkins
30 years of activity
Perkins and Kleiner were joined by Caufield and Byers (from AMC) in 1977 and the partnership becomes KPCB. Later come famous icons John Doerr (Intel) and Vinod Khosla (Sun founder)
KPCB I KPCB II KPCB III KPCB IV
$15M $55M $150M $150M
(1976) (1980) (1982) (1986)
Sequoia
Joining Valentine were new partners (not active anymore):
Bud MacRae 1974
Gordon Russell (Fairchild, Syntex) 1976 focused on medtech retired in 2000
Walter Baumgartner (Bank of America) 1979 focused on computer memories left in 1989
Sequoia
Joining Valentine, famous tobecome partners:
Pierre Lamond (National) - 1981 Mike Moritz (Time Magazine) 1986 Doug Leone (HP, Sun) 1988
The Reid Dennis Legacy

1974
Reid Dennis, Burton McMurtry (Palo Alto Inv. was stopped in 1973) and Burgess Jamieson (Westven) found Institutional Venture Associates (IVA) in 1974 with $14M inc. American Express money ($5M) and the Ford Foundation.
David Marquardt joins as an associate.
The Reid Dennis Legacy

1976
The IVA partners soon disagreed on one Dennis deal (Collagen) and separated. Dennis launched Institutional Venture Partners (IVP) alone in 1976. The same year, McMurtry and Marquardt found Technology Venture Investors (TVI) with James Bochnowski (Shugart Assoc.)
Later join Pete Thomas (Intel), James Katzman (Tandem) Robert Kagle (BCG)
The Giants success stories

1972 and after
Some investments of the Giants

1974 and after
Hits and misses

from a couple of interviews
Venture Capitalist Arthur Rock Pitch Johnson Bill Draper Burton McMurtry Dennis Reid Don Valentine Tom Perkins First Big Hits SDS, Teledyne Bool and Babbage, then Tandem Qume Rolm Recognition Technology Atari but also Apple, Cisco Tandem
First Big Miss Bool and Babbage, Compaq Apple Tandem Sun Apple
More on http://www.startup-book.com/2011/11/14/the-missed-deals-of-venture-capitalists
A genealogy
What do VCs look for?

a never ending debate
Some winning venture capitalists claim to look almost exclusively at the backgrounds and personalities of the founders; others focus mostly on the technology involved and the market opportunity the venture addresses
from The New Venturers, Wilson (1984)

Davis & Rock
They look for outstanding people without worrying too much about the details of product and marketing strategy. The right people have integrity, motivation, market orientation, technical capability, accounting capability and leadership. The most important is motivation. Rocks style was supportive of entrepreneurs with an implacable will.
from Wilson (1984)

Perkins
Perkins put it in once sentence: If you have good people, proprietary technology and a high growth market, youll win every time. Like most simple rules, this one is extremely difficult to follow. [] The biggest challenge an entrepreneur faces, Perkins believes is recruiting, motivating and teaching other employees.
from Wilson (1984)

Valentine
There are people risks, markets risks, product development risks and finance risks. We will not invest in a company unless we understand and are comfortable with three of these risks. The components of success are product differentiation, a fastgrowing market, a team of dedicated people and money. Arthur Rock and others are along the lines Id rather have A people and a B idea than B people with an A idea. The problem with that approach is that it is seldom clear who the A people are. Valentine viewed Apple as a company founded by modest individuals from any business experience that succeeded well beyond any legitimate expectation. People you can change, but you can not change a market.
He avoided biotech: There is no market, there are few identified problems that are resolvable [with biotech] and the people are research people. We looked ta forty companies which had no management, no market identification, no product application, but were clearly interested in doing research we were 90% right. We were embarrassingly wrong. It never occurred to us that you could raise public money for companies with infinite losses and little damn prospect of sales
from Wilson (1984)

a never ending debate
The debate will never have an unchallenged winner. Both side can point to winning investments that seem to vindicate their point of view and both can point to losers or missed opportunities.
from Wilson (1984)
The Maturity 1978-1993
The new players

1976
DuBose was a founder of Menlo Ventures in 1976. Carlisle joined in 1982 and Jarve in 1985
1978
Founders Dick Kramlich (Arthur Rock & Associates ) Franck Bonsal (Alex Brown) Chuck Newall
Ed Glassmeyer cofounded in 1978 with Stewart Greenfield of Oak Investment Partners.
In 1980, MPAE was created by Merrill, Pickard, Anderson and Eyre (from BankAmerica).
The new players

1981
Bill Bowes is the founder and prior to founding USVP, Bill was the founding shareholder (and its first employee) of Amgen
1981
Sevin Rosen was founded in 1981 by L.J. Sevin (Mostek) and Ben Rosen (MorganStanley). They used KP as a backer and co-invested with them in Compaq and Lotus.
1982
Paul Ferri, a venture capitalist for more than 30 years, was the founding partner of Matrix Partners in 1982. Prior to Matrix, he founded Hellman Ferri Investment Associates (1977 to 1982) and was a general partner of WestVen Management (1970 to 1978).
The new players

1983
In 1979, Adler & Company of New York established an office in Silicon Valley. In 1983, two Adler partners, James Swartz and Arthur Patterson, spun-off to create the bi-coastal firm, Accel Partners, having offices in New York and Silicon Valley.
1983
Bill Davidow, SVP Sales & Marketing at Intel launches MDV
1984
Gregory Avis
Roe Stamps
Stephen Woodsum
The new players

1984
Rick Frisbie, founder of Battery Ventures
David Morgenthaler founded the firm in 1968. Morgenthaler began raising institutional funds in the 1980s and worked at Whitney before,
1985
Tim Draper (3rd gen. Drapers; from Alex Brown) founds Draper associates and is later joined by John Fischer (from ABS ventures) and Steve Juverston (HP)
Some investments
1978 and after
The New Kids Around the Block
1993-2005
Benchmark Capital
1995
Bruce Dunlevie Andy Rachleff
Bob Kagle
Kevin Harvey
David Bierne
In 1995 Bruce Dunlevie and Andy Rachleff (MPAE), two veterans of the industry, decided to create their own company, Benchmark. Their goal was to have a firm with a "fundamentallydifferent architecture," with no one person at the top. The men had connections, money and their own brain power and they immediately set to work. They added two more partners to their ranks in very short order, Bob Kagle (TVI ) from the venture capital world and Kevin Harvey from the technology sector, and then brought in David Bierne, who had built a highly successful executive search business centered around technology.
August, Lightspeed, Redpoint

Marquardt (TVI) & John Johnston (TVI, H&Q) launch August in 1995.
Redpoint was founded in 1999 by top partners each from Brentwood Venture Capital and IVP
The VC arm of Weiss, Peck & Greer Venture Partners (1971) spun-off in October 2000
Some investments
1995 and after
The funds of founders

Mostly web2.0
Web entrepreneurs have set up funds: Pierre Omidyar (eBay), Peter Thiel and Max Levchin (PayPal), Marc Andreeseen (Netscape) which in turn invest in web2.0 companies such as Facebook, Twitter, Slide, Seeismic.
Super Angels
Recycling of old stuff?
Before you had the business angels investing in the early rounds (up to $1M) and the VCs who would seldom invest in rounds smaller than $12M. Now the frontier is blurred: you have the seed VCs (Index Seed being a recent one) and the Super Angels fighting for the same deals.
More on http://www.startup-book.com/2011/06/22/superangels-recycling-of-old-stuff and http://www.startup-book.com/2010/08/17/super-angels/
Some historical and economical perspective
1959-2005
Some key drivers

But what is the real impact?
1957: some great IPOs: HP, Varian 1958: The SBIC (Small Business Investment Corporation) act provides federal fund matching and will enable the dramatic increase of venture capital 1969-76: Tax Reform acts (as well as 1976) raised tax from 25% to 49% on capital gains, dying up VC after 1969 1974: The oil crisis together with the new ERISA act that mandates criminal penalties for pension fund managers who lose money with high-risk investments nearly stops inv. in venture capital 1979: A new ERISA act which decreases fiduciary responsibility together with a good IPO market in 1980 (Apple, Genentech) creates a new inflow of money 1983: Too much money for two many companies: the Disk Drive companies crash. Venture Capital matures in the 80s. The semiconductor industry competes with Japan and lay-offs. The crisis will end with 1993: the beginning of the Internet
The SBIC Ups & Downs

1959-1993
Source: Creating Modern Venture Capital: Institutional Design and Performance in the
Early Years by Caroline Fohlin
The endowments
1974-
The 1974 ERISA Act enabled pension funds to put money in venture capital but what about university endowments?
Managers of endowments followed the prudent man rule: consider the probable income as well as the probable safety.
Walter Cabot, manager of the Harvard Management Company decided in 1977 he could invest in venture capital: - 2/3 of the 33 endowments he consulted were already making VC investments - a condition was to make your homework, i.e. check the quality and credibility of the funds.
By early 1984, Harvard had committed over $130M to venture capital.
The maturity
The 1980s
The late 80s brought maturity, but was also a big crisis for technologies. The semiconductor companies cut their work force and the technology & VC sectors suffered until 1993 or so.
Ne w C o m m it m e n t s t o V e n t u r e C a p it a l Fu n d s in C o n st a n t 1 9 9 3
Me dia n re t urns of v e nt ure c a pit a l

35 30
$ Billions
7 6 5 4 3 2 1 0 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 Year
25 20 15 10 5 0 1973 -5
1975
1977
1979
1981
1983
1985
1987
1989
year
Source: The Rise and Fall of Venture Capital, Gompers
The Impact of Venture Capital

1993
The Impact of Venture Capital

1993-2006
Company Apple Computer Au Bon Pain Biogen Chiron Cirrus CML Group Compaq Computer Conner Peripherals Cray Computer Data General Digital Equipment Evans & Sutherland Federal Express Genentech Intel Lotus Micropolis Microsoft Orbital Sciences Quantum Raychem Seagate Staples Starbucks Stratus Computer Sun Microsystems Tandem Computer Teledyne Teradyne Wellfleet VC Sequoia, A. Rock Angels TA Associates Burr Egan Deleage IVP, NEA Angels Sevin Rosen, Mayfield, IVA Compaq $8M from misc. investors Adler ARD Venrock Burr Egan Deleage, MPAE KP A. Rock Sevin Rosen IVA IVA KP IVP
CRV, IVP KP KP, Mayfield, Johnson A. Rock Greylock Brentwood, NorthBridge Total Average
Data 1993 Status & Data 2006 Sales ($M) Jobs Cap. ($M) Status Sales ($M) Jobs Cap. ($M) 7'977 14'910 3'576 19'315 17'787 74'110 123 1'250 223 acquired by Compass Group in 1999 149 415 1'110 2'442 3'440 16'110 217 2'179 2'171 acquired by Novartis in 2006 354 1'353 885 647 424 193 645 5'608 697 liquidated in 1999 7'191 13'010 9'978 acquired by HP in 2002 2'151 9'097 774 acquired by Seagate in 1996 352 383 50 bankruptcy in 1995, acquired by SGI 1'077 6'500 271 acquired by EMC in 1999 14'371 94'600 3'223 acquired by Compaq in 1998 142 1'100 132 73 268 39 7'808 95'000 4'206 32'294 225'000 33'950 650 2'510 3'189 9'284 9'500 92'180 8'782 29'500 27'082 35'382 94'100 118'740 981 4'738 2'705 acquired by IBM in 1995 382 2'298 99 bankruptcy in 1997 3'573 14'430 15'117 44'282 71'000 298'180 190 1'123 315 703 2'600 1'040 1'167 2'455 695 834 2'320 462 1'385 10'772 1'581 acquired by Tyco in 1999 3'043 43'000 1'648 9'206 60'000 15'910 883 7'539 1'063 16'078 36'071 18'760 163 4'585 866 7'786 145'800 26'650 514 2'610 723 acquired by Ascend en 1998 4'308 13'300 2'009 13'068 38'000 22'310 2'030 9'963 1'368 acquired by Compaq in 1997 2'492 21'000 997 1'433 7'270 1'350 555 4'500 891 1'376 4'000 2'910 180 738 784 acquired by Nortel in 1996 73'835 420'466 88'428 194'203 717'580 722'894 4'764 27'127 5'705 12'138 44'849 45'181
The Internet bubble

2 .3 2 .1 1 .8 1 .6 1 .9 1 .7 1 .7 1 .6 1 .6 2
The 90s enthusiasm and 00s crisis

Me dia n m ult iple s ( 'x ')
2 .8 2 .2
1 .4 1 .1 0 .7
0 .6
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Med ian I RR ( % )
50 40 30 20 10 0 1985 -1 0 -2 0 -3 0 Year 1987 1989 1991 1993 1995 1997 1999
The recent numbers may not be accurate as they are too recent; they however some negative effects of the Internet bubble.
Source: The Venture Capital Industry Report, Dow Jones
The Nasdaq and the VCs

1971-2006
4'500 4'000 3'500 3'000 2'500 2'000 1'500 1'000 500 0 1971 1976 1981 1986 1991 1996 2001 90 80 70 60 50 40 30 20 10 0
1974: the oil crisis and ERISA act 1984: the HDD crisis 1990: US recession and declining IRRs 2001: the Internet crash
100
Natural scale
Nasdaq ( end y ear)
VC f unds ( $B)
10'000
1'000
10
100
10
0. 1
1 1971 1976 1981 1986 1991 1996 2001
0. 01
Source: Compilation HL
Log scale
Nasdaq ( end y ear)
VC f unds ( $B)
A chronology of funds (1/2)
Fund number and year of creation
A chronology of funds (2/2)

Size of funds (in $M)
Notes 1: fund 2000 back to $471M 2: fund 2001 back to $830M 3: fund 2001 back to $450M 4: fund II (1981) $45M, III (1984) $126M 5: fund 2000 back to $600M 6: fund 2000 down to $650M, then $450M
A subjective Top VC list

TOP US VCs
Mohr Davidow
16'000 14'000 12'000 10'000
Redpoint DFJ Benchmark USVP Crosspoint Brentwood Accel Sevin Rosen Oak Sierra NEA Matrix CRV Austin Sequoia Onset Interwest Menlo IVP Battery Mayfield
$M
8'000 6'000 4'000 2'000 0
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
KPCB
Year
And the returns?

Exceptional IRRs
Although the data are not so easy to obtain (the numbers below are not fully consistent), the VC world has generated exceptional returns. The individual success stories are known. Some previous slides give some more numbers. The reader can compare to the typical Wall Street numbers
And the returns?

Exceptional IRRs
VC Fund KP KPCB II KPCB III KPCB IV KPCB V KPCB VI KPCB VII KPCB VIII "Vintage" year 1972 1980 1982 1986 1989 1992 1994 1996 Size ($M) 8 55 150 150 150 150 225 299 Multiple 31.2 4.3 1.7 1.7 4.1 3.0 32.0 17.0 IRR 51% 51% 10% 11% 36% 43% 122% 286% VC Fund Sequoia Sequoia II Sequoia III Sequoia IV Sequoia V Sequoia VI Sequoia VII Sequoia VIII "Vintage" year 1972 1974 1981 1984 1989 1992 1996 1998 Size ($M) 7 21 44 90 63 100 150 250
Multiple
IRR 51% 71% 11% 18% 40% 110% 175% 90%
1.8 2.4 5.2 15.5 16.4 2.5
Mayfield IV Mayfield V Mayfield VI Mayfield VII Mayfield VIII Mayfield IX Battery II Battery III Battery IV
1981 1983 1987 1992 1995 1997 1988 1994 1997
55 110 160 165 185 252 41 85 200
2.6 1.3 3.5 1.9 3.2 4.0 4.2 9.7 4.5
26% 5% 27% 33% 63%
NEA V NEA VI NEA VII NEA VIII Matrix III Matrix IV Matrix V
1990 1992 1996 1998 1990 1995 1998
199 230 311 566 80 125 200
3.8 7.6 3.5 1.2 7.7 20.0 3.8
31% 66% 69% 84% 75% 219% 640%
37% 65% 244%
USVP IV USVP V Accel IV Accel V
1994 1996 1993 1996
118 171 135 150
5.9 1.6 2.9 14.7
72% 33% 82% 196%
DFJ II Benchmark I Benchmark II
1992 1995 1997
20 100 125
2.3 39.3 2.4
31% 236% 419%
Israel 1992-2005
The Israel VC size
The largest Israel VC funds
Israel success stories
More about Israel
More on http://www.startup-book.com/tag/israel/
http://www.startup-book.com/2011/02/05/start-up-nation-israel
and Europe? 1972-2006
A list of European funds
Timescale
1996-2005
Timescale
1996-2005
8'000 7'000
Wellington Viventures Ventech TVM Sof innova Siparex Quester Prelude Polytechnos
6'000
Partech Partcom (Iris) Nordic VP Logispring Kennet
5'000
Innovacom Index IDG Holland Gilde
Galileo
4'000
Eqvitec Ealy bird DVC DFJ eplanet Doughty Hanson
3'000
Crescendo CDC Innovation Capricorn Capman Benchmark
2'000
Banexi Auriga Atlas Apax GE Apax FR Apax UK
1'000
Amadeus Alta Berkeley ACT Accel 3i
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
And a few people

a relatively recent activity
The first attempt of Doriot in the UK, Technical Development Corporation, launched in 1962, was sold at a loss to the ancestor of 3i. A second attempt in 1965, European Enterprises Development (EED), set up in Paris, was more successful despite an unsupportive environment. The financial uncertainties of mid-70's led it to stop its activities in 1976. Its example however had led a number of institutions to get interested in the activity. From 1977, the EEC started to study action plans to finance enterprises, inter alias high tech start-ups.
Founded in 1972 by Christian Marbach and Antoine Dupont Fauville with strong links in the USA: Peter Brooke and Jean Delage (TA Associates) will be critical. 22MFF helped by a law on Venture Capital.
http://www.europeanvc.com/history.htm
And a few people

Sir David Cooksey was the Founder of Advent Venture Partners in 1981 and was Chief Executive from 1981 to 1987 and Chairman from 1987 until his retirement in 2006.
Bryan Wood Founder 1982
Michiel de Haan Founder 1980
1982
Vincent Worms and Thomas McKinley
TVM launched in 1983 with 87M A US company created in 1969 by Alan Patricof which has a European presence since the 80s
Founded in 1945 by British banks; the 3i group was created in 1987 when the banks sold their stakes to a public limited company.
http://www.europeanvc.com/history.htm
And a few people

1997
2000
1998
2001
The founders fund
by the Skype founders
by the Alando and Jamba founders
Some European deals
And recently? 2005...
Too much or too little money?
Too much or too little money?
Silicon Valley leads as ever
Silicon Valley leads as ever

A History of Venture Capital - Lebret - Vers 1.1

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Service des relations industrielles (SRI) EPFL

Service des relations industrielles (SRI) EPFL

Service des relations industrielles (SRI) EPFL

The Ancestors pre - 1958

1957 The Traitorous 8

Service des relations industrielles (SRI) EPFL

1957 Arthur Rock

Service des relations industrielles (SRI) EPFL

There had been also

Service des relations industrielles (SRI) EPFL

Georges Doriot (a Harvard professor) founded American R&D in 1946 in Boston.

and also hobby of the rich

Service des relations industrielles (SRI) EPFL

The Ancestors investments

Service des relations industrielles (SRI) EPFL

Service des relations industrielles (SRI) EPFL

The First Generation Part 1 1958-1965

The First Generation

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The First Generation

1962 Draper and Johnson

Service des relations industrielles (SRI) EPFL

Service des relations industrielles (SRI) EPFL

The government got interested

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Some 1st gen. investments

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Some 1st gen. investments

Service des relations industrielles (SRI) EPFL

Draper&Johnson invested in Tandem

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The First Generation Part 2 1965-1972

The First Generation

1965 Sutter Hill, AMC

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The First Generation

1969 Mayfield, Venrock

Service des relations industrielles (SRI) EPFL

The First Generation

1970 Palo Alto Investments

Service des relations industrielles (SRI) EPFL

The First Generation

Service des relations industrielles (SRI) EPFL

The First Generation

Service des relations industrielles (SRI) EPFL

Some 1st gen. investments

Service des relations industrielles (SRI) EPFL

Service des relations industrielles (SRI) EPFL

The Giants 1972-1978

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Service des relations industrielles (SRI) EPFL

Tandem ($152M) Genentech ($47M)

KP First Fund (1972-1984)

Value on June 30,1984

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Service des relations industrielles (SRI) EPFL

Service des relations industrielles (SRI) EPFL

KPCB I KPCB II KPCB III KPCB IV

$15M $55M $150M $150M

(1976) (1980) (1982) (1986)

Service des relations industrielles (SRI) EPFL

Bud MacRae 1974

Gordon Russell (Fairchild, Syntex) 1976 focused on medtech retired in 2000