Big VC Turning Down Public Funds To Keep Records Private

Venture Capital

from the here-comes-the-fallout dept

And so it begins. There had been some debate over whether or not something like this would happen. While the general consensus among the VC community seemed to be that forcing the public disclosure of VC fund performance via any organization investing publicly controlled money was a bad thing, not everyone was sure if VCs would turn away such money. Now they have. Sequoia – one of the best known top tier firms has told the University of California that they won’t take their money because they want to avoid having their returns made public. This isn’t for pennies either. Sequoia has had a 22-year relationship with UC, investing over $100 million. which has been tremendously profitable for both sides. I can certainly see where they’re coming from. The simple fact is that by revealing portfolio returns, the VC funds are going to be forced to be judged on the wrong criteria – such as quarterly returns, which make no sense in the VC world. Furthermore, since most of the numbers (especially in the early years) are based on markets that are not liquid, the numbers are basically guesses at current value – but have no actual meaning. If everyone who saw those numbers had a deep understanding of how venture capital worked, it wouldn’t be such a big deal. Unfortunately, most people don’t, and the likelihood of these numbers being misinterpreted in a way that makes it more difficult for a VC to do his or her (ok, mostly his) job, makes working with any public institution too much of a hassle. This is bad news for just about everyone involved – especially those who have their pension money invested in a public institution.