For some reason, there appears to be an insatiable appetite by limited partners to invest in a category [venture capital] that cannot sustain even a fraction of the capital currently within it. It is the craziest thing that LPs are willing to invest so much in a category that has yielded so little and from so few. The returns have been miserable. If you take away a couple of exits, such as Google and MySpace, there haven’t been meaningful returns generated. There are [venture] firms that have never generated a positive return or have not even returned capital in 10 years that are raising money successfully. And that surprises the heck out of me. People talk about the top quartile [firms] — it’s not about the top quartile, it’s barely about the top decile, or even a smaller subset than that. Sequoia Capital partner Doug Leone on the venture capital industry’s abysmal returns to investors (quoted on Paul Kedrosky’s Infectious Greed blog, circa 2006)
Tags: finance investment | May 8, 2012