Tuesday, November 11, 2014

Heartfelt Thanks To Our VC Veterans

I want to send a special note of sincere thanks to all of our veterans in the venture industry, who I don't think are remembered enough or thanked enough for everything they have done for us.  For this group, they're mostly known for their great returns, but most importantly, should be remembered for their service and commitment to our country.  Happy Veterans Day to our Venture Veterans.

Paul Madera (Meritech Capital Partners), Stuart Peterson (Artis Ventures), Steve Lazarus (ARCH Venture Partners), Paul Stone (5AM Ventures), Beau Laskey (SVB Capital), Ed Colloton (Bessemer Venture Partners), Chuck Newhall (NEA), Mike Ward (QuestMark Partners), Brad Harrison (Scout Ventures), Robin Bellas (Lightstone Ventures), David Jones (Bull City Venture Partners), Ben Britt (Route 66 Ventures), John Ward (Key Venture Partners), Dain DeGroff (Triangle Peak Partners), Sean Caplice (Gunderson Dettmer), Paul Denning (Denning & Co.), Andrew Swinand (Abundant Venture Partners), Andrew Boyd (ABS Capital Partners), Ram Vela (Greenspring Associates), Han Kim (Altos Ventures), Brian Chee (Polaris Partners), Ryan Popple (KPCB), Chris Shonk (ATX Seed Ventures), Jeremy Conrad (Lemnos Labs), John Drew (TCV), Chris Thomas (Fontinalis Partners), Brooke Seawell (NEA), Paige Craig (Arena Ventures), Tim Danford (Intel Capital), Art Pappas (Pappas Ventures), Phil Clough (ABS Capital Partners), Morgan Jones (Union Park Capital), Jonathan Seeber (Updata Partners), Sean Sebastian (Birchmere Ventures), Brian Knitt (Cheyenne Capital), Dave Munichiello (Google Ventures), John DeLoche (RSTP), Dave Finley (Sverica), George Kellerman (Crystal Tech Fund).

If I left anyone off, please let me know as it was unintentional and they deserve as much praise as the few folks I do know offhand.

Sunday, November 9, 2014

The Truth in LPing Act

I loved reading the peHUB article on Pivot Partners' survey that found that GPs think that LPs are liars.  It reminded me to finish this blog post I started and spoke about at the VCIC conference this June and didn't finish.

The key takeaway from all of this reporting is one of my favorite passages from the Bible. Specifically, Proverbs 22:1 which states: "A good name is more desirable than great riches; to be esteemed is better than silver or gold".  As an LP, great riches can't be the end goal alone, otherwise we would all be on the GP side where the economics are better.  Moreover, endowments, foundations, family offices, insurance companies, and pension plans don't get a carry on their underlying funds like a FoF does.

If you don't have good looks, great intellect or a venture capital birthright (i.e., me), all one can rely on is their reputation. Everyday, my calendar reminds me of the Sophocles' quote that "A man can get a reputation from very small things".

While I think the headline "GPs think LPs are Liars" is just that, a headline meant to draw readership, I do believe that LPs can do more to not so hypocritically bemoan GPs for a lack of transparency and then not reciprocate.  For years, LPs have complained about GPs not having an annual meeting, having a bad annual meeting, not having good quarterly reports, not publishing a data room, etc.  The list goes on and on.  Now, GPs are complaining about LPs' lack of transparency.

The Truth in LPing Act starts when responding to an in-bound email or phone call, or before you hit send on an out-bound email seeking a meeting or call (introductory or update).  If you don't have money to commit, be upfront about it.  Lord knows an entrepreneur doesn't want to meet with a VC without capital to invest, so why would a GP want to meet with an LP without money.  I think a lot of folks don't have the confidence to be comfortable not knowing what they don't know, and are naturally inquisitive beings.  Just as GPs chase the new new thing with founders and startups, LPs are constantly chasing alpha and the new new thing from the GP community.

Before I meet with a GP, I do my very best to let them know whether or not we have capital to invest, how much and when.  I am too fearful of wasting people's time to do so otherwise.  This also means, if you're a GP, you should be asking these questions upfront.  It's not meant to be rude, but rather to understand why you're meeting.  Spend five minutes talking about what that LP has done, is doing and wants to do.  Ask how much they commit per fund and how often they re-up.  Every LP (to the extent permitted by confidentiality restrictions, which are not to be taken lightly) should be ready, willing and able to give the same level of detail about their portfolio construction as a GP should for their own.

Don't take the answer: "We're over-allocated" or "Out of capital" without a grain of salt.  Sometimes that just means "I'm out of capital for you, but if GP [ABC] calls, we can find room".  A great reputation can't be built on what you're going to do.  And it's easier to add to a great reputation than to get one.

Wednesday, November 5, 2014

CALPA's First Year: A Look Back with a View Forward

Over eighteen months ago we here at CALPA cooked up the idea of bringing together all of greater Chicago's most influential limited partners investing in private equity to build a more collaborative, engaged, informed and fun community of peers.  It was an experiment at first, because we were not initially sure people would want to collaborate and come together.  Boy were we wrong.  Not only has CALPA brought together all of the largest (and smallest) limited partners across Chicago, with a few friends from Milwaukee, South Bend, Champaign, and St. Louis, but we have also built a network effect across the community that is impossible to ignore.

As a brief reminder, we get together three times a year to have a free luncheon featuring industry thought leaders debating a best practice, big idea, trend, or problem facing all of our portfolios.  We have members from the insurance company, public/private pension plan, family office, asset management, fund-of-funds, endowment and foundation communities.

In the past year, we've had three luncheons.  Our first was on the state of growth equity, or rather what is growth equity.  Pete Mooradian from Cambridge Associates graciously moderated a panel with Danny Rosenberg from Sterling Partners and Mark Kvamme from Drive Capital.  Northern Trust was kind enough to host the trailblazing event which was very well received.  Our second event was on the state of the secondaries market and Jason Gull from Adams Street Partners moderated a panel with folks from the LP, GP and intermediary communities, including Northwestern University, Madison Dearborn Partners and Park Hill Group.  It was a packed house at Adams Street's offices.  This summer, the kind folks at the University of Illinois Foundation and Kirkland & Ellis LLP hosted a luncheon on co-investments and Priya Pradhan from Cambridge Associates moderated a panel with Beau Laskey from SVB Capital, Robb Turner from ArcLight Capital Partners and Kevin Kester from Siguler Guff.  Later this month, Northern Trust will be hosting an incredibly innovative conversation with Andy Schwab from 5AM Ventures and Ryan Drant from NEA with the goal of demystifying healthcare venture investing and spelling out the ABCs of pharma and medical device regulatory, reimbursement, financing and clinical risks.

We plan to continue hosting a luncheon once every four months and will be having an inaugural holiday party on December 11th, thanks to the generous support of UBS' Private Funds Group and Kirkland & Ellis.

One of the most important things we've done in the past year, is really showcase how broad and deep the LP community is in Chicago and how we are not a flyover city if you want to raise capital.  We're too big, too nice, and too collaborative to ignore.

As our LP membership goes continues to burgeon and our luncheons continue to grow in popularity, we hope that our mission of building a more informed, engaged and collaborative LP community in and around Chicago only continues to blossom.

We would welcome any comments, questions or snide remarks on what we've done or where we're going as this is an organization founded by LPs for LPs (only).  We would especially welcome any thoughts on future luncheon ideas in 2015.