Data wars: Return of the performance debate

Data wars: Return of the performance debate

Chris Higson, a professor in accounting at the Coller Institute of Private Equity at London Business School, and Rüdiger Stucke, a professor at the University of Oxford, last week published a report entitled ‘The Performance of Private Equity,’ in which they reiterated concerns first made by Stucke in December about the quality of Thomson Reuters’ data on a sample of US private equity funds.
Higson and Stucke claimed that in 2010, performance data for more than 40% of the private equity funds in a Thomson Reuters sample of US funds raised between 1980 and 2005 was out of date. They added that incomplete data on these funds had led to a downward bias, therefore making it easier for many funds to claim they outperform the index.
Higson said: “It turns out the [Thomson Reuters] data is wrong, significantly biased. As far as we can tell it’s that whoever was looking after the data simply didn’t update it.”
But Leon Saunders Calvert, head of global deals and private equity at Thomson Reuters, told Financial News this week : “We have already emphasised those claims are not substantiated and not valid. Coller appear to have taken the opportunity to highlight suggested problems which are unsupported by our data.”
He added that Coller had not “contacted us or spoken to us” and that Thomson Reuters continues to discuss its data with private equity firms to ensure it can “reflect their market accurately”.
Higson said in the report last week: “The performance is measured in terms of net asset values. Because there are so many incomplete records in Thomson Reuters’ [data], those net asset values got frozen and significantly understated the performance of the funds.”
Calvert said there had been no errors in its system and the incomplete data was as a result of its researchers being unable to obtain the latest cash flows of some funds. He said Thomson Reuters had criteria for what defined a so-called “stale fund” so they could be stripped out and its research currently included no funds it deemed to be stale. He added the company’s clients were aware the data’s methodology included some funds with incomplete data.
He declined to disclose the number of researchers responsible for updating the company’s system on the grounds that the information was commercially sensitive.
He added that because Thomson Reuters had not supplied Higson and Stucke with the underlying cash flows of the funds in its sample because they were confidential, “to come to some of their conclusions, which we know are wrong, they have to have made a number of assumptions about the data”.
The comment highlights the continuing debate in the buyout industry over the credibility of performance and valuation figures. Last week, members of the private equity industry criticised valuation methods following news that US regulator the Securities and Exchange Commission had launched an informal inquiry into how valuations are calculated.
In May, trade body the European Private Equity and Venture Capital Association for the first time made its complete market research publicly available as it attempts to improve its transparency and the credibility of its data.
–write to jennifer.bollen@dowjones.com
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Heverest.ru Gets a New Round of Investment

MOSCOW–(BUSINESS WIRE)–
Heverest.ru, an online retailer for sport, leisure and travel goods, has attracted another $4.3 million in financing. The majority of the investment was received from one of Russia’s largest investment funds, along with one of the existing finance partners of Heverest.ru, the European venture fund, eVenture Capital Partners. After this new round of investment, the total amount invested in Heverest.ru has now reached $6.7 million.
The company intends to use this additional funding to finance the expansion of their online product offering, as well as improving the quality of their customer service by developing the current CRM system. A proportion of the new funds will be allocated to subsidize the launch of a new marketing campaign, which aims to increase brand awareness of Heverest.ru among current and potential clients.
Heverest.ru is a start-up business launched by Fast Lane Ventures, a company focused on the development, launch and promotion of innovative internet businesses since 1^st June 2011.
At present, Heverest.ru has an online collection of more than 6,000 items from 150 major International sport and leisure brands including: Salomon, Nike, Columbia, Adidas, Reebok, Puma, Speedo and others, with the product range being renewed on a regular basis. The website has an average of 600,000 visitors per month.
Vladimir Kim, CEO of Heverest.ru, commented:
“Our ambition is to become Russia’s most popular online store for sport, leisure and travel goods. Before Heverest.ru, there were no such websites offering all kinds of sport, leisure and travel products in one place. We are in a strong position to change this, having joined the club of most successful startups in the Russian market of e-commerce, such as UTINET, KUPUVIP, SAPATO, etc.”
Marina Treshchova, CEO of Fast Lane Ventures, commented:
“We are witnessing two significant trends in this country. First, is an unprecedented growth of e-commerce and second, is an increasing government interest in sports and encouraging active lifestyles. Heverest.ru, as an online supplier of sporting goods, benefits from both of these trends. The Company’s dynamic pace of development and committed support from our investors, supports our own philosophy and proves that this is the right choice of the business model.”
A recent report by Russian market research agency RuMetrika.ru showed that Russia’s sports and leisure industry made about $6 billion in 2010. According to Fast Lane Ventures’ forecast, the market is likely to reach $12 billion by 2015. Equally, the global market of sport and leisure goods is expected to grow from $175 billion in 2010 to $240 billion in 2015 (Data Insight). That means Russia’s share in this segment will increase from 3.5 to 5%.
Fast Lane Ventures is the leading developer of internet companies in the high growth Russian internet market. For more information on Fast Lane Ventures please visit http://fastlaneventures.ru/en/


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Easily Maneuvering Through Entrepreneurial Risks

Starting off on the ground level, I have helped grow family business 20 years ago in India. The concept of venture financing did not exist at that time and no seed funds were available through bank loans. My father, who is my hero and role model made it seem that anything was possible if you believed in it. He knew how to grow the business organically and take manageable risks. I co-founded Serus Corporation based in Mountain View, CA, along with Barbara Hoefle who also believed in much of the same principles. What have we learnt? Some fundamentals that haven’t changed over time—fundamentals that we are very passionate about.
Create Return on Investment—the Bottomline: You have a great idea and want to start a company. What is the first thing to do? Develop an investor presentation and start looking for money? Wrong! You need to put together a product presentation and start looking for paying customers. This may seem like an impossible task at first. It is not.
Focus on a sustaining model: Start thinking about creating long-term value. Before seeking investment, you need to understand that your primary responsibility is to generate value and return 10 to 50 times the investment, within a 3 to 5 year period. Investors are in the business to make money and entrepreneurs are in business to innovate.
Investment alone is NOT going to help: It saddens me to see today’s entrepreneurs’ first task while starting a company is to seek investment. It almost seems like obtaining venture capital is the main goal of starting the company. This is quite like thinking that you want to buy a house because your goal is to get a mortgage loan. The goal is NOT the mortgage, the goal is to improve your living conditions or to make an investment by buying the house. A mortgage loan just enables you to achieve that goal. The aim of starting a company should be to satisfy a market need that would in turn nurture the life of your company. Venture funds should only be to enable you to achieve that goal.
Measure Revenue-per-employee and profits: In failing to educate young entrepreneurs of their responsibility when seeking investment, we will continue to create companies doomed to fail rather than succeed. Avoid falling into the hole that many companies have fallen into during the last few years. Entrepreneurs need to stop getting carried away with investor pitches. Example: The very famous ideal “hockey stick” financial growth plan that everyone knows is just that—ideal.
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Growth-Stage Technology Investor WestSummit Capital Adds Two New Partners

PALO ALTO, Calif. & BEIJING–(BUSINESS WIRE)– WestSummit Capital, a private equity fund with a core focus on growth-stage technology companies that have a substantial presence or a strategic interest in China, announced venture capital and private equity specialist David Lam has joined the firm as managing director, and Elise Huang has been promoted to partner. With over $200 million under management, WestSummit Capital is focused on fostering business growth and technology innovation as well as job and value creation in the technology, Internet/new media, telecommunications and clean technology sectors.
Founded in 2010 by four former technology executives, Raymond Yang, Datong Chen, Jay Deng and John Yu, WestSummit Capital holds a distinctive position in the market as an investor with strong Chinese roots, decades of executive and operational experience in Silicon Valley and China, and thirty-plus years of combined technology investment experience at venture capital and private equity firms in the United States and in China.
The founding partners have worked together in different ways since the mid-1900’s, graduated within three years of each other from China’s prestigious Tsinghua University, and hold over 110 years of combined executive operating experience including three NASDAQ listings and one M&A transaction.
“WestSummit Capital is one of the first China-based funds to go global and our portfolio spans China, the United States and Europe,” said Raymond Yang, a co-founder partner and Managing Director of WestSummit Capital. “We believe 2012 is a breakout year for growth-stage companies interested in moving into the Chinese market. We view ourselves as a value-add, strategic partner with regard to China-value creation for the companies we invest in. That’s where we add tremendous insight.”
Yang added, “Many executives are still wary of doing business in China because they do not know where to start or how to navigate in China’s business culture. And conversely, Chinese-based companies feel the same way about expanding into the West.
“Everyone on the WestSummit team has deep industry relationships, solid credentials, and hands-on operational and investment experience in both the U.S. and in China. Our team knows first-hand the key role that transparency plays in creating lasting shareholder value, and understands what it takes to win in the global marketplace. David’s addition and Elise’s promotion reflect our ongoing commitment to extending our team’s capabilities, reach and experience.”
The team
The WestSummit Capital partnership includes:
Two new partners with extensive private equity, technology and international investment banking experience and extensive industry connections:
Investment Portfolio
WestSummit Capital has been quietly building its portfolio over the past two years. The firm has lead or participated in investment rounds in companies based in the U.S., Europe, and China. Investments include:

• Accent, supplier of a System-on-a-Chip (SoC) platform for smart meters (Italy)
• GigaDevice, provider of NOR flash memory (China)
• Inside Secure, provider of technology solutions for contactless payment and near-field communications (NFC) (France)
• SilkRoad Technologies, cloud-based human resource management software solutions (USA)
• Tilera, developer of a multi-core processors for Cloud Computing environments (USA)
• Unity Technologies, 3D gaming development software platform (USA)
• VeriSilicon, provider of custom silicon solutions and SoC turnkey services (China)

About WestSummit Capital
WestSummit Capital is one of the first China-based technology growth-stage private equity firms in the industry. The firm invests in companies that have a substantial presence in or strategic interest in China and focuses on the technology, media, telecommunications and enabling clean tech sectors. WestSummit has offices in Beijing, China and Palo Alto, USA. More information can be found on the WestSummit Capital website at: www.westsummitcap.com
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Israeli start ups raised $2.14b in 2011

Israeli start ups raised $2.14 billion in 2011, an 11-year high, and 70% more than the $1.26 billion raised in 2010, and 91% more than the $1.12 billion raised in 2009, according to the IVC Research Center and KPMG Somekh Chaikin Quarterly Survey. 546 start ups raised capital in 2011, up from 391 companies that raised capital in 2010.
The average financing round rose to $3.92 million in 2011 from $3.23 million in 2010 and $2.51 million in 2009.
Despite the good year, IVC is pessimistic about the future, “As predicted, 2011 numbers were impressive, but our forecast for 2012 is not as optimistic,” said IVC CEO Koby Simana. “As local venture capital funds have found it increasingly difficult to raise new capital and maintain a satisfactory level of first investments in early stage companies, foreign investors have been upping their investments, which more than doubled in the past year.
“However, with Israeli VCs continuing to downsize their investments and with the world economy still very much unsettled, foreign investors can no longer be counted on to fill in the gap. We believe annual investment can fall to as low as $1.5 billion if there is no dramatic recovery in the next few months.”
124 start-ups raised $569 million from Israeli and foreign venture capital funds in the fourth quarter of 2011, 9% more than the $522 million raised by 137 start-ups in the third quarter, and 65% more than $344 million raised by 100 start-ups in the corresponding quarter of 2010.
77 start-ups raised more than $1 million each during the fourth quarter, including five start-ups that each raised more than $20 million, and thirteen start-ups that raised $10-20 million each.
Israeli venture capital funds invested $525 million in Israeli companies in 2011, 42% more than the amount invested in 2010 and 28% more than in 2009. However, Israeli venture capital funds accounted for just 25% of total investment in 2011 – the lowest level in the past decade, in which the average proportion was 40%. First investments accounted for 31% of total investment by Israeli venture capital funds in 2011, up from 29% in 2010 and 2009, and the average first investment was $2.21 million, and the average follow-on investment was $1.06 million.
In 2011, the internet sector attracted the largest share of investments for the first time in the last decade, with 115 internet start-ups raising $482 million, 23% of total investment, more than double the $222 million, 18% of total investment, raised in 2010, and $147 million, 13% of total investment, raised in 2009.
The communications sector was in 2nd place, with 88 start-ups raising $432 million, 20% of total investment in 2011, 82% more than in 2010. The software sector was in third place, with start ups raising $415 million, 19% of total investment, in 2011, nearly triple the amount raised in 2010.
Mid-stage start ups raised the most capital in 2011, raising $903 million, 42% of total investment. Early stage start-ups accounted for 26% of total investment, and seed-stage start-ups raised 5% of total capital. Mid and late-stage companies raised $1.48 billion altogether – 90% more than the $781 million raised in 2010.
KPMG Somekh Chaikin partner Technology Group, Ofer Sela said, “Mobile solutions and applications are the primary factor behind the significant increase in communication company investments in the past two years. Israeli companies have traditionally excelled in the communications sector, and the high quality of such companies is expected to attract foreign investors in the future.”
He added, “The substantial increase in late stage investments indicates the strength of Israel’s technology industry, as well as its attractiveness to foreign investors. An impressive number of mature Israeli companies have reached substantial sales. A decade ago, such companies would most likely have gone the IPO route, raising funds publicly. Today, due to changed conditions in IPO markets, these companies are relying principally on both existing and late-stage investors. As a result, we expect a large portion of these companies to be sold over the coming 24-month period.”
Published by Globes [online], Israel business news – www.globes-online.com – on January 24, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012
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Newly Launched Hyde Park Venture Partners Makes First Investment in Virtual Store Research

HPVP is a newly-launched venture capital fund investing in high-growth technology companies in Chicago and the Midwest. As its first investment, it has chosen the growing field of online virtual store research, co-leading the $1.5 million funding of InContext Solutions.
Chicago, IL (PRWEB) January 08, 2012
A new early-stage investor has emerged in the growing entrepreneurship and technology landscape of Chicago: Hyde Park Venture Partners (HPVP). Its first investment is in InContext Solutions, a pioneer in web-based 3-D virtual store environments. HPVP, along with Hyde Park Angels, co-led InContext Solutions’ recent $1.5 million round of equity funding. The consortium of investors also included leading graphics and computing company, AMD.
HPVP is an early-stage venture capital fund investing in technology companies in the Midwest, with particular focus in Chicago.
“We are proud to add HPVP to our financial partners and to be recognized among Chicago’s technology leaders,” said Bob Gillespie, CEO and co-founder of InContext Solutions. “We plan to continue to grow our software offering and to lead innovation in virtual store research and in collaborative product and store planning.”
“InContext Solution’s unique offering and experienced management team are exactly what we look for in a company,” said Guy Turner, managing director of HPVP. “In the retail and consumer manufacturing world, speed is critical to staying on the shelf and ahead of the competition. Thanks to InContext Solutions, product and packaging decisions that used to take months can be completed in a matter of weeks. We are excited for what will come next.”
About InContext Solutions

InContext Solutions is an award-winning technology and market research firm specializing in online 3-D environment simulations with applications in virtual store research, collaborative store planning, and e-commerce. The company’s research delivers highly accurate behavioral and attitudinal insights into shopper behavior, while its collaborative software tools allow many of the world’s best-loved consumer brands to make more effective decisions around product and store planning, environment design and other in-store revenue drivers. As a next-generation e-commerce platform, InContext Solutions’ vision is to drive online sales through lifelike user experiences that engage, entertain and captivate with 3-D audio-visual elements.
For more information, visit http://incontextsolutions.com/.
About Hyde Park Venture Partners

Hyde Park Venture Partners (HPVP) is a venture capital fund investing in early stage technology companies in the Midwest, with particular focus in Chicago. HPVP invests in technology-enabled business and consumer services and healthcare IT companies raising their first or second round of institutional capital.
HPVP draws on its strategic relationship with Hyde Park Angels (HPA) to provide industry and business expertise to its portfolio companies through a network of more than 90 seasoned business executives, entrepreneurs and service professionals. HPVP’s principals and the HPA network take an active role in mentoring and guiding portfolio companies in product development, business strategy, financing and exit through both formal director roles and informal mentorship relationships.
For more information, visit http://www.hydeparkvp.com/.
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Chiara Piccinotti
InContext Solutions
312-462-4491
Email Information

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