Venture Funds' Secrecy Under Attack
from the more-information-vs.-stupid-investors dept
This is really a follow up story to one that we’ve mentioned in the past a few times. There’s nothing really new in the article, but it does a better job explaining the situation than some of those previous articles. The question is whether or not venture capital funds who receive public money should be required to release information about those funds’ performance. I have mixed feelings on this one, as I can see both sides of the story. Those who want the information released say that this is public money, and the public has a right to know how well it’s doing in its investments. The side that’s against revealing the data (which includes the VCs themselves) points out that it’s very difficult to determine the real rate of return on a venture fund early on. Later on, there’s no problem whatsoever – and many firms are glad to release the numbers. But, considering that VCs should be investing for the long term (even if that doesn’t always happen), doing more short-term reporting can have a very negative effect on the funds and the startups they support. One of the nice things about being a private company is that you can take a longer term view without worrying about your quarterly numbers. If the VCs are forced to reveal (subjectively) how their startups are doing, suddenly those private companies need to worry about very short-term numbers. Even worse, most of those valuations are pretty useless numbers. None of it really means anything concrete until a company is sold or goes public.