100 GLOBAL VCs

For the first time since the venture industry’s creation, Red Herring will rank the best performers on quantitative and qualitative basis. This endeavor comes at a juncture where the asset class remains imperiled from many fronts. The love story between Sand Hill Road and Wall Street seems to have faded. In spite of astronomic riches, economic successes of the past, and countless startups with over $100 million in yearly revenue awaiting for a window to go public the future does not look bright. Liquidity events and returns have fallen to their lowest point, and limited partners are reluctantly accepting capital calls from venture firms to replenish their coffers. They are publicly complaining about the venture capitalists’ dysfunctional compensation scheme that encourages them to live off management fees instead of capital gains. Even the Obama administration has targeted the venture funds and is trying to tax them, provoking their ire and most likely jeopardizing the golden goose’s future.

Red Herring has screened the Global VC 200 finalists from among more than a thousand known and active venture funds across the globe. It has selected the Top 100 and remarkably enough, realized that this group represents almost all of the exits, returns, or liquidity events that have happened since 2003. It does not mean that others have not performed but that the recent vintage funds (1999 and after) have rarely provided to their limited partners the returns expected. Little has been said about the consistency of the best players and more importantly of their ability to navigate across continents with portfolio companies established in such places as Shanghai, Berlin, or Tel Aviv.

But Red Herring is not resting at that stage. We ranked the relative weight and contribution of each of those firms and used a multi-criterion, weight-averaged model. We will publish that list in the coming days. Let me just say that we did not anticipate nor expect the surprises from the information that we unearthed from public, semi-public, and private sources. We would like to thank those firms who shared information and enabled us to make apples-to-apples comparisons by identifying their portfolio companies’ performances. We also thank the limited partners who have spent hours talking about theirmanagers and shared their perspective. We took all the data into account. After more than eight months, we are ready to reveal the first round of analysis. Of course, we humbly accept all criticism of this pioneering effort, which has already triggered some reactions from venture funds that had not been selected for the Red Herring Global VC 200.

Firms to make the Red Herring Global VC 100 list largely hail from the United States. This only reflects a U.S. venture industry that is older and more experienced than its peers in Asia and Europe. However, if the past andmacroeconomic trends recently taught us a lesson, Asia will grow in vigor in that domain as well for it has a large industrial base, a world class education system, and plenty of capital, notwithstanding many supportive governments, unlike the U.S. Congress, which have understood that most jobs are created after an IPO, not before. At the recent International Business Forum in San Francisco, Dixon Doll, the exiting National Venture Capital Association chairman, summarized the state of the industry. He called for greater transparency and collaboration among bankers, entrepreneurs, and venture capitalist. It is hoped that Red Herring is doing its part with the upcomingGlobal VC 100 rankings. Stay tuned.

Alex Vieux
Publisher and CEO
Red Herring

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