You can always count on the government to be a day late and a dollar short. Such is the case with decisions by the states of Colorado and Michigan to protect private equity data. It is laudable that the states took action, but why did they have to wait so long? Venture capitalists couldn’t have been any clearer about what was going to happen if PE performance data were made public. See our November 2002 issue, aptly titled “DISCLOSURE.”
Government officials had ample time to correct the situation before the big wave of fund-raising hit late last year. But they apparently didn’t believe what VCs were saying or just figured they were bluffing. The facts weren’t in dispute: Everyone agreed that fund sizes were shrinking to one-third or one-half of what they had been in the previous cycle, so there was little need to seek out the deep pockets of public pension funds.
So no one should have been surprised that Benchmark Capital, Charles River Venture Partners, Sequoia Capital and Woodside Fund didn’t pursue public money for their latest funds. It’s also unlikely that Kleiner Perkins invited the University of California into its latest fund.
What is surprising is that a couple of firms took money from UC-De Novo Ventures and Novak Biddle Venture Partners. Even those gestures won’t undo the damage. Public LPs like UC, CalPERs, CalSTRS and the University of Michigan got shafted because politicians didn’t act quickly enough. It is unlikely that Sequoia will allow the University of Michigan back into its fund now that the state has changed its disclosure law.
Ultimately, the little investor (like my wife, who by virtue of being a teacher is part of CalSTRS) gets shafted by not being able to participate in the best venture funds. I’ve seen my wife’s paychecks, so believe me when I saw she’s counting on every penny of her pension.
Do me a favor and clip this article and send it to one of your elected officials. It’s too late for them repair the damage done by disclosure, but maybe next time they will believe VCs when they warn them about the dire consequences of a public policy issue. Hey, we can at least hope.