The same tale in two cities
8 April 2008
Two high profile VC-backed exits this week, one in each of Canada’s tech capitals. Waterloo’s Sirific and Ottawa’s Meriton were both bought by strategic investors after years of VC investing. At a time when VCs want the certainty SaaS and later stage opportunities (which means – limited partners want the certainty of SaaS and later stage opportunities) these big bets seem like a throwback to another era.
Although details weren’t announced, these don’t feel like wildly successful exits. Probably somewhere in that middle of pack for that vintage. Neither company had announced the kind of revenue generating customer traction (think Dragonwave and Clearwire) that drives a home run. And they both raised tens of millions over 8 or so years. Yes there was value built (which the strategics can afford to fund and harvest) but after that long these are deals where the clock ran out.
So the pitch to LPs for investing in Canadian VC stories doesn’t get stronger.
But, as reported here, the average venture returns over the past 10 and 20 years have outperformed the average buyout returns.
In venture the glass doesn’t have to be half full. Just 20% full. Big bets like the re-start at Platespin can deliver the returns that make up for other losses.
It is up to the VCs and funded companies to deliver the returns that keep LPs coming back. But we need LPs to remember that you don’t get diversification by avoiding the asset class. Those vintage 2000 deals aren’t going to have great returns; diversification happens across vintage years as well as funds.
CWN
No comments yet