Zombies at the Venture Capital Roundtable

Field Reporter: Are they slow-moving, chief?
Sheriff McClelland: Yeah, they’re dead. They’re all messed up.
           — Night of the Living Dead (1968)

Here is another excerpt from Venture Capital Journal’s thought-provoking venture capital roundtable with LPs (investors in venture funds):

Clarke: …Three-plus years ago, I put together what I call our “walking wounded” list of [venture] firms, the firms that appear as though they should not be able to raise another fund. We had no expectation we would ever have to make re-up [Ed., reinvestment] decisions for those firms again, but every one of those firms, like a zombie movie, is still out there today, and most of them have raised new funds over the last 12 months. And they have raised them, almost without exception, with over-subscriptions–not including us.

Apparently losing money in buckets, not being uncorrelated with other investments, and being illiquid are not enough to keep the institutional investors managing your pension funds away from investing in broken venture firms.

Related posts:

  1. The LP Traffic Jam at Top-Tier Venture Firms
  2. The Venture Capital Crisis
  3. A New Venture Fund Bubble?
  4. So Many Venture Firms, So Little IRR
  5. Newbies Flood Venture Capital (Again)

Comments

  1. That is truly scary, Paul — although I think you probably meant either “not being correlated with” or “being uncorrelated with” rather than “not being uncorrelated with.”
    Sorry — English major :-)

  2. Mathew — Actually, as grammatically scary as it might be, I really and truly meant “not uncorrelated with”. While that is an offensive construction, the term of art in the financial biz is “uncorrelated” when one is referring to that aspect of an attractive asset, so when you’re trying to say it’s not such, people in the biz regularly say “not uncorrelated”.
    To be somewhat more nuanced, it actually feels like a better way of saying things, in some ways. Calling venture “correlated” (the opposite of not uncorrelated) is, to my ears, a stronger statement. It is, in the circumstances, unwarranted, hence the appeal of the teeth-grindingly awful construction above.