Private Equity & its Economic Role
On Friday, UoC and UoI hosted their annual Private Equity Conference. Steve Kaplan, the primary organizer from UoC, did a masterful job pulling together quite a few interesting panels with panelists from leading universities such as UoC, Northwestern, UoI and Berkeley as well as numerous participants from the general partner ranks. Topics included:
-- Agency costs of VC Control
-- How Smart is Smart Money? (yes, there was some modest value uncovered...)
-- Friction points in the GP/LP relationship
-- Networks in VC Firms
-- Use of Leverage in Buyouts
Prof Yael Hochberg, one of Northwestern's rising stars, presented her paper on Venture Capital Networks and their impact on Performance. I provided some commentary and perspective from the trenches. Some of the more interesting elements of her presentation (file attached and downloadable) included:
-- VC's clearly rely on their networks & relationships with each other to drive superior performance
-- She & her collegues looked at various venture firms based on the number of deals they were invited into and the number they invited others into.
-- VC firms with more experience tended to have larger networks and higher performance
-- Those with networks had higher exit ratios (IPO/sale) and more follow on rounds
-- Supporting Kaplan's work, successful VC's performance persisted across funds raised
-- Commented that perhaps there is a cycle that success leads to better networks which in turn leads to more success and so on...persistence
-- a high profile exit/IPO has a disproportionate impact on a fund's reputation & network
-- VC networks in a region can create a significant barrier to entry and more attractive pricing
Well done, Steve, Michael, Morten, Yael and others!