Traditional (“Big”) VC is alive and well…
After accounting restatements and other mishaps and still burning crazy $, Groupon is finally public. This juggernaut of a company is only three years old and raised over $1.1B before entering the public markets. That is a crazy ride! On paper, Groupon’s investors (14 venture funds) generated a 3.3X return. PE Hub dug deeper and unearthed paper returns for each VC Fund. Some highlights:
- Andreessen Horowitz: Invested $40M, now worth $132M in less than one year
- Greylock – invested $ 65M, now worth $ 215M
- New Enterprise Associates: Invested $ 1.5M, now worth $ 2.28B!
Yes, that’s a 154X return for NEA who was Groupons’ early investor.
Now, who knows what those shares will be worth when the VCs can finally sell them (shares are usually restricted and locked up for 6 months after a company goes public), but on paper this is looking like one awesome investment. It also completely flies in the face of criticism of traditional VC and its lack of fit with today’s lean startups. While the overall industry may be under performing, the elite tier 1 funds continue to deliver massive wins.
And while big VC $ may not fit for most companies these days, it’s not meant to. VC is and always will be about the outliers, not the averages. And if the elites keep delivering home runs like this, then traditional VC will not be going away anytime soon.
VC is indeed a home run game, which does not mean casino. Problem is, it may look like that sometime. When it comes to Groupon, that company could be a bubble just by itself. I'm more curious about its revenues and profits in 6 months than the stock value. The formers will be the true indicators of whether or not all these VC's hit a home run
I agree that the fundamentals of the business are unclear. But I think there is more to it than meets the eye and the sales force they have built will yield some serious long term results.
Good observations Mark. And i fully agree. Whether you are a $25m fund, a $100m fund or a $500m fund, VC is still a home run game, despite all the recent activity and press about smaller exits. Run the numbers – exit proceeds, average ownership, hit rate – I certainly have!