By Russ Garland
Limited partners had a chance to praise and lambaste the venture industry during a no-holds-barred panel at the National Venture Capital Association?s VentureScape annual meeting last week. They delivered more rants than raves.
A sample: ?The truth is many of you in this room won?t get to raise another fund,? said Jamey Sperans of Morgan Stanley.
The session, intended to be edgier than past LP panels, which have featured measured criticisms of VCs, came near the end of the two-day event, as a lineup of past NVCA chairmen waited in the audience for a celebration of the organization?s 40th birthday.
The panel drove home several points: that LPs are emboldened in dealings with VCs, that investors still think venture fund performance in general is terrible and that when it comes to investor relations, attitude is everything.
?Don?t lie,? said Sperans in advising VCs how to fundraise. ?I get lied to every single day?Exaggeration is lying. Being hyper-promotional is lying. Don?t do it.?
Furthermore the ?illusory superiority complex? is rife in the venture industry, Sperans said, even though, by definition, half of venture investors are below average and ?particularly in venture, average sucks; top quartile, frankly, kind of sucks.? He encouraged VCs to practice ?business love? in dealings with their partners, entrepreneurs and investors, and advised that ?a little humility and a little self awareness go a long way.?
Lindel Eakman of?University of Texas Investment Management?said the endowment?s venture investments had not outperformed its credit or private equity portfolios even though it has backed some of the best-performing venture funds.
?Not only do you have to be good, you have to be lucky,? Eakman told VCs. An LP?s job is even harder, he said, because ?I have to be right every time? in picking funds to back.
Chris Douvos of Venture Investor Associates compared venture capital to a lottery and VCs? behavior just prior to launching a new fund to the famous ?I Love Lucy??chocolate factory skit, in which Lucy tries in vain to keep up with her assembly-line duties as pieces of candy pile up, unwrapped. In the VCs? case, it?s the companies piling up in their portfolio that they?re trying to hide, as deals far exceed exits, he said.
Jason Mendelson, the Foundry Group managing director who moderated the session, let his speakers go at it. He said in an email after the event that NVCA members loved the panel.
?I thought it was one of the best panels I?ve ever seen,? said Paul Maeder of Highland Capital Partners, a former NVCA chairman. He especially praised Sperans?s remarks.
?It?s not all just about the money,? Maeder said. ?Fundamentally, it?s all about interpersonal relationships.?
He said he?d asked for a video of the session so he could show it to his partners.
Write to Russ Garland at russell.garland@dowjones.com. Follow him on Twitter at @RussGarland
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