Publications

TrueBridge prides itself on a data-driven approach to the venture industry. In addition to extensive due diligence processes, the firm regularly gathers, analyzes, and publishes information about the venture industry and trends.

TrueBridge Market Analysis: State of the Venture Capital Industry

As part of our annual analysis of key venture capital industry trends, this report examines fundraising, investments, valuations, exits, and net returns to limited partners.

While the first half of 2015 was a rip-roaring start for the venture capital industry, by the second half of the year, VCs adopted a more measured approach to their investments, and excitement tempered. In many ways, 2016 played out the same way that 2015 ended, and ultimately, the venture capital industry remained at its “new normal.”

Though 2016’s decline in valuations, dearth of public exits, and macroeconomic uncertainty prompted VC managers to move cautiously, the IPO market has been off to a strong start, beginning with Snap’s $3.4 billion debut on NYSE in March of 2017. And plenty of capital remains for startups and entrepreneurs to tap into nascent but promising technologies, including those related to robotics, drones, autonomous vehicles, augmented reality, virtual reality, machine learning, and artificial intelligence.

It’s worth remembering that some of today’s most successful startups all started during or after the 2008 financial crisis. We’re excited to see the next cohort of companies to emerge from this similarly uncertain, but compelling, time for VC.

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TrueBridge Market Analysis: State of the Venture Capital Industry

As part of our annual analysis of key venture capital industry trends, this report examines fundraising, investments, valuations, exits, and net returns to limited partners.

2015 began as another banner year for fundraising, investing, and valuations. Even as the longtime trend of venture capital consolidation continued, and the number of firms raising new funds decreased, we saw NEA raise the largest-ever venture fund at $2.8 billion. We saw $72.3 billion of venture capital invested across all stages—a post-bubble record. More milestones were reached as seed and early stage valuations reached post-bubble highs in 2015, while late-stage valuations reached an all-time high for the third consecutive year. But beginning in the second half of 2015, the IPO and M&A markets showed signs of weakness, and public markets grew increasingly volatile, causing VCs to grow more cautious.

Overall, we believe we are witnessing both a return to the “old normal” and the beginning of a new era of innovation.

As capital continues to concentrate with fewer firms, investors are optimistic about the investment opportunities in front of them, the industries that remain ripe for disruption, and the long-term bull market for technology.

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TrueBridge Market Analysis: State of the Venture Capital Industry

As part of our periodic analysis of key venture capital industry trends, this report examines fundraising, investments, valuations, exits, and net returns to limited partners.

Overall, our analysis indicates that while the direction of several trends changed course, the trend of consolidation of venture firms and capital in the industry continued throughout 2014. VCs raised and invested significantly more capital in 2014 than the prior year, yet fundraising continued to concentrate in the hands of relatively few well-established firms. Late stage valuations reached an all-time high for the second consecutive year, thus shining a spotlight on the growing number of unicorns, or venture-backed private technology companies valued at over $1 billion.

While valuations continue to fuel the bubble debate, the opportunity to invest in the next generation of highly disruptive, innovative, rapidly growing technology companies is exciting and promising, particularly with the backdrop of a healthy exit environment and impressive asset class returns.

While some late stage valuations may be a mirage, the opportunity to invest in the next generation of highly disruptive, innovative, rapidly growing technology companies is exciting and grounded in reality.

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TrueBridge Market Analysis: State of the Venture Capital Industry

As part of our periodic analysis of key venture capital industry trends, this report examines fundraising, investments, valuations, exits, and net returns to limited partners.

Overall, our analysis indicates that capital has continued to concentrate in the hands of relatively few, demonstrating that, by and large, the experienced venture capitalists with unique competitive advantages, strong track records, and excellent reputations among entrepreneurs are able to raise and invest sizable pools of capital today.

Based on data through the end of 2013, we believe that the industry is right-sizing and that key metrics, such as fundraising and investment activity, are reasonable and sustainable. That said, currently there are certain trends and segments of the market that should be viewed with caution. We are optimistic that the current transformations of the technology sector will result in strong returns for our limited partners, and we believe we are well positioned to capitalize on these exciting shifts in the industry.

Investing with a select number of the highest-quality VCs – those who have the best deal flow, vision, ability to add value, and track record – remains critical to generating good returns.

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TrueBridge Market Analysis: State of the Venture Capital Industry

As part of our annual analysis of key venture capital industry trends, this report examines the venture market as a whole, including fundraising, investments, valuations, and exits.

In contrast to prior reports, this year we also consider net limited partner returns, which have improved significantly for recent vintage years. Our 2012 study of the state of the venture capital industry comes on the heels of the Kauffman Foundation’s scathing venture capital piece, which assigns primary blame to limited partners for poor venture capital performance. While it is true that many LPs have regrettably funded marginal managers, our belief is that while the early-2000s suffer from seemingly poor returns, history would show that these will improve over time as those vintages continue to mature. At the same time, the strong net performance of vintage years 2007 and onward is very notable given their youth.

The venture capital industry continues to achieve a more sustainable capital base, as we have consistently discussed in the past, and that the “flight to quality” of capital in the industry will continue to characterize the venture market going forward.

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TrueBridge Market Analysis: State of the Venture Capital Industry

Much has changed since our 2010 State of the Venture Capital Industry report. Last year, headlines about venture firms shuttering, poor recent industry returns, and venture capitalists exiting the industry abounded. Shift to early-2011, and talk of another venture capital bubble has taken the place of malaise. To avoid bold predictions, the 2011 report largely strays from the bubble debate (while mentioning that this time feels different). Like the 2010 version, the report blocks and tackles, examining industry trends around four key areas: fundraising, investments, valuations, and exits.

Our core tenet – that it is difficult to time the venture capital market and the best managers will consistently outperform public markets – notwithstanding, now may be a better time than most points in the past 10 years to commit capital to the venture asset class, with capital committed today well positioned to earn attractive returns.

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TrueBridge Market Analysis: State of the Venture Capital Industry

In our State of the Venture Capital Industry report last fall, we emphasized the difficulty in “timing” the asset class, since it is nearly impossible to access the best managers intermittently, and difficult to predict the best time to invest in seed and early stage companies that will achieve liquidity in five to ten years. At the same time, we suggested that for a number of reasons, now appears to be a better time to commit capital to the asset class than any point in the past 10 years (a self-serving exception, we must admit!). More time to digest the Great Recession’s specific impact on the venture capital industry, and a larger sample of relevant industry data have added substance to our argument.

 

Less capital and fewer active firms, with the stronger firms surviving, leads to lower valuations and more truly innovative companies receiving capital relative to "me too" businesses. And as a result, we believe returns over the next 10 years have the potential to be attractive relative to those of the past 10 years.

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TrueBridge Market Analysis: State of the Venture Capital Industry

As a general premise, we adhere to the “endowment model” of investing and believe venture capital has a place within every diversified portfolio. We think it is difficult to “time” the market as well as access the best managers intermittently, and that it therefore makes sense to invest consistently in the asset class. It is also our belief that investors that have done so over long periods of time have been richly rewarded. While speaking from an admittedly biased perspective and perhaps offering more tactical guidance than normal, we hope this piece offers our perspectives on the current state of the market, given the profound impact that extraneous factors continue to have on the venture capital industry. It is based on experience, empirical research, and ongoing discussions with our managers.

Venture capital managers and their entrepreneurs should emerge from the downturn more conservative and focused, and thus better able to generate attractive returns for their investors.

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2017

TrueBridge Market Analysis: State of the Venture Capital Industry

TrueBridge Capital PartnersSpring 2017
2016

TrueBridge Market Analysis: State of the Venture Capital Industry

TrueBridge Capital PartnersSummer 2016
2015

TrueBridge Market Analysis: State of the Venture Capital Industry

TrueBridge Capital PartnersSummer 2015
2014

TrueBridge Market Analysis: State of the Venture Capital Industry

TrueBridge Capital PartnersSummer 2014
2012

TrueBridge Market Analysis: State of the Venture Capital Industry

TrueBridge Capital PartnersSummer 2012
2011

TrueBridge Market Analysis: State of the Venture Capital Industry

TrueBridge Capital PartnersSummer 2011
2010

TrueBridge Market Analysis: State of the Venture Capital Industry

TrueBridge Capital PartnersSpring 2010
2009

TrueBridge Market Analysis: State of the Venture Capital Industry

TrueBridge Capital PartnersFall 2009

The State of Private Equity in India

This whitepaper reviews the current private equity climate in India, including an analysis of the country’s historical GDP growth, the macro-economic challenges venture investors are facing today, and TrueBridge’s outlook on the future of private equity in India.

While the India growth story remains intact, returns have proven elusive for many managers and investors, especially those invested in dollar-denominated funds. The reasons for this shortfall are numerous, but include several macro-economic factors outweighing solid business fundamentals. While the Indian private equity market continues to mature, thereby offering hope to investors, it is unclear when and if the macro-economic environment will improve such that investors will be rewarded.

In the long run, the growth story coupled with strong business fundamentals should ultimately prevail. The question, however, is this: Can investors wait that long when attractive returns can be earned elsewhere?

For the future of private equity in India, we anticipate that the growth potential of the country, coupled with strong business fundamentals, will likely prevail in the long term.

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The Revolution in Enterprise Computing

This sector trends report discusses three large technology shifts taking place in computing infrastructure today (cloud computing, SaaS, and mobile), as well as their impact on enterprise software and venture capital investments.

Since the dawn of Silicon Valley, large shifts in computing and the provisioning of software have led to significant wealth creation opportunities. Examining the history of large tech businesses over the last twenty-five years is instructive, as two different narratives begin to emerge. In the first, young venture-backed upstarts offer a new product or service and experience explosive growth, disrupting an existing industry and yet at the same time creating opportunities for those few incumbents nimble enough to adapt to the new challenger and operating environment. The second narrative is more familiar to observers of the venture capital industry, with many of the old incumbents simply withering away.

Today there is an enormous technological shift in the way that software used by businesses is created, sold, delivered, and utilized. This is the next massive wave in enterprise computing and has Silicon Valley abuzz with excitement.

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Back to the Future: Venture Capital Today

As investors survey the venture capital industry and note its returns over the past ten years, many are discouraged. Common sentiments are that returns have been poor and the venture capital model does not work. These ideas frequently appear in both general business journals and in tech-focused media outlets and could perhaps be called the “normal view” as they reflect conventional wisdom. Forbes has touted “Venture Capital’s Coming Collapse,” while the Financial Times screams that venture capital is “hit by excesses.” BusinessWeek believes that “fear of a shakeout is making for less venturesome capital.” Finally, The Economist notes that “institutional investors have been badly burnt putting money into new ventures over the past five years” and are “tempted to say good riddance.”

Building a venture portfolio requires long periods of illiquidity, attempts to gain access to managers who are often closed, even now, to new investors, and the difficulty of evaluating track record information when comparables might be opaque or hard to come by.

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2014

The State of Private Equity in India

TrueBridge Capital PartnersSpring 2014
2013

The Revolution in Enterprise Computing

TrueBridge Capital PartnersSummer 2013
2010

Back to the Future: Venture Capital Today

TrueBridge Capital PartnersWinter 2010

Private Equity Performance: Returns, Persistence, and Capital Flows

Steve Kaplan and Antoinette Schoar

Abstract: This paper investigates the performance and capital inflows of private equity partnerships. Average fund returns (net of fees) approximately equal the S&P 500 although there is substantial heterogeneity across funds. Returns persist strongly across different funds raised by a partnership. Better performing partnerships are more likely to raise follow-on funds and larger funds. This relationship is concave so that top performing partnerships grow proportionally less than average performing partnerships. At the industry level, market entry and fund performance is cyclical; however, established funds are less sensitive to cycles than new entrants. Several of these results differ markedly from those for mutual funds.

Weighted by committed capital, venture funds outperform the S&P 500.

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Smart Institutions, Foolish Choices? The Limited Partner Performance Puzzle

Josh Lerner, Antoinette Schoar, and Wan Wong

Abstract: The returns that institutional investors realize from private equity investments differ dramatically across institutions. Using detailed and hitherto unexplored records of fund investors and performance, we document large heterogeneity in the performance of different classes of limited partners. In particular, endowments’ annual returns are nearly 14% greater than average. Funds selected by investment advisors and banks lag sharply. These results are robust to controlling for the type and year of the investment, as well as to the use of different specifications. Analyses of reinvestment decisions and young funds suggest that the results are not primarily due to endowments’ greater access to established funds. Finally, we examine the differences in the choice of intermediaries across various institutional investors and their relationship to success. We find that LPs that have higher average IRRs also tend to invest in older funds and have a smaller fraction of GPs in their geographic area, and that the performance of university endowments is correlated with measures of the quality and loyalty of the student body.

LP-specific differences in investment styles are significantly correlated with the performance differences between LPs.

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Informational Hold-up and Performance Persistence in Venture Capital

Hochburg, Ljungqvist, Vissing-Jorgensen

Abstract: Why don’t successful venture capitalists eliminate excess demand for their follow-on funds by aggressively raising their performance fees? We propose a theory of learning that leads to informational hold-up in the VC market. Investors in a fund learn whether the VC has skill or was lucky, whereas potential outside investors only observe returns. This gives the VC’s current investors hold-up power when the VC raises his next fund: Without their backing, he cannot persuade anyone else to fund him, since outside investors would interpret the lack of backing as a sign that his skill is low. This hold-up power diminishes the VC’s ability to increase fees in line with performance. The model provides a rationale for the persistence in after-fee returns documented by Kaplan and Schoar (2005) and predicts low expected returns among first-time funds, persistence in investors from fund to fund, and over-subscription in follow-on funds raised by successful VCs. Empirical evidence from a large sample of U.S. VC funds raised between 1980 and 2006 is consistent with these predictions.

Performance in the VC market appears persistent, suggesting VCs have skill. But why then do successful VCs not eliminate excess demand for their next funds by raising their carries?

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It Ain't Broke: The Past, Present and Future of Venture Capital with TrueBridge Capital Introduction "In Defense of Venture Capital"

At TrueBridge Capital Partners, it is rare for us to refer our limited partners to an external resource for insight into the nature of the venture industry. We cannot, however, pass up the chance though to share with you the latest research from two of the most renowned private equity academics in the United States.

Steven Kaplan is the Neubauer Family Professor of Entrepreneurship and Finance, as well as Faculty Director of the Polsky Entrepreneurship Center, at the University of Chicago’s Booth School of Business. Josh Lerner is the Jacob H. Schiff Professor of Investment Banking at Harvard Business School, and organizes two groups at the National Bureau of Economic Research: Entrepreneurship and Innovation Policy and the Economy. Kaplan and Lerner recently collaborated on a paper for the National Bureau of Economic Research. Entitled “It Ain’t Broke: The Past, Present, and Future of Venture Capital,”(1) their study will soon be published in the Journal of Applied Corporate Finance.

While their research is always of interest to us, we find this particular report worthwhile to share with you. The paper is very wide-ranging in its consideration of the venture industry, quantitative in its approach and methodology, and the authors’ conclusions match our own viewpoints on the nature of the industry in many ways. We believe their conclusions validate the strategy that TrueBridge has pursued in constructing our venture capital portfolios.

Kaplan and Lerner put the U.S. VC industry into its historical context, assess the current state of the VC market, and discuss the implications of that history and the current conditions for the future.

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London Business School’s New Research on the Performance of Private Equity

London Business School’s Coller Institute of Private Equity unveils new ground breaking research on PE performance: outperformance of 8% against S&P 500, as well as underlying problems with previous research studies. In “The Performance of Private Equity,” Chris Higson, a professor in the accounting group at London Business School, and Dr Ruediger Stucke of Oxford University, study how PE has performed relative to public equity markets and add to the weight of evidence that suggests manager selection in PE is of paramount importance to LP returns.

"For many years there has been ambiguity in the evidence about private equity performance, that has been troublesome both for the industry itself and for commentators trying
to understand the economics of buyouts. This paper finally resolves that issue and can be taken as definitive." - Higson

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2003

Private Equity Performance: Returns, Persistence, and Capital Flows

TrueBridge Capital PartnersNovember 2003
2005

Smart Institutions, Foolish Choices? The Limited Partner Performance Puzzle

TrueBridge Capital PartnersFebruary 2005
2008

Informational Hold-up and Performance Persistence in Venture Capital

TrueBridge Capital PartnersAugust 2008
2010

It Ain't Broke: The Past, Present and Future of Venture Capital with TrueBridge Capital Introduction "In Defense of Venture Capital"

TrueBridge Capital PartnersSpring 2010
2012

London Business School’s New Research on the Performance of Private Equity

TrueBridge Capital PartnersFebruary 2012

Blog

Since 2011, TrueBridge has authored articles for Forbes.com. TrueBridge covers a range of industry topics, including sector trends, venture-backed tech companies, and the overall state of the venture industry. Visit Forbes.com to read all historical TrueBridge posts.

How Better Mortgage is Giving Control Back to Homebuyers

The financial crisis of 2008 launched a new era for the fintech industry. But even with their nimbler, tech-first approach, many fintech startups still couldn’t crack some of the most heavily regulated sectors—namely, the mortgage industry. Better Mortgage is the rare exception.
Read More

In A Swirl Of Healthcare Talk, Parasail Health Puts Patients Front And Center

At a time when the burden of medical costs has shifted onto individuals more than ever, young tech company Parasail Health is charting a new course by putting patients back into the healthcare equation and allowing them to better plan and manage their expenses.
Read More

Orchard Platform Is Disrupting Financial Services From The Inside Out

Fintech startup Orchard Platform is using its powerful technology and unique position to make marketplace lending more transparent, secure investor trust and interest, and accelerate the growth of the still-nascent industry.
Read More

The Real Value Of Gig Economy Startups Isn't The Model

As multiple “Uber for X” companies have revved up only to quickly fade, it is clear that not all on-demand marketplaces are created equal. Startups Bellhops and Checkr prove that value is created in all corners of the gig economy and that ripe opportunities remain in spaces desperate for transformation.
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Edwin Poston Speaks At PreMoney SF 2016

Edwin Poston joins the "I'll tell you what LPs want, what they really really want" panel at PreMoney SF 2016, an annual conference held by 500 Startups on the future of venture capital. On the panel Edwin explains what TrueBridge looks for in a venture manager: "great track record and terrific deal flow."
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Satellite & Imaging Tech Is Changing The World As We Know It

The implications of drastically improved imaging and GIS technologies are massive not just for business but also for conservation and sustainability. This two-part series explains how startups like Descartes Labs, Orbital Insight, Mapillary, and CartoDB are driving positive change in this space.
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The Midas List

Since 2011, TrueBridge has partnered with Forbes to construct The Midas List, a ranking of the top venture capitalists who have created significant value for investors and helped grow the golden technology companies of the future.

In helping generate each year’s List, TrueBridge applies the same rigorous process used to underwrite its own investments. This practice includes an analysis of quantitative data provided directly by general partners and by Dow Jones VentureSource, which is supplemented by qualitative references gathered through the team’s unique and longstanding relationships.

With every List, TrueBridge and Forbes collect more data and work to make the process as comprehensive as possible.

News

2017

The 2017 Forbes Midas List Rings The NASDAQ Stock Market Opening Bell

NASDAQ | April 20, 2017

TrueBridge Capital Closes First Direct Investment Fund Above $100 Million Target

Press Release | February 22, 2017
2016

TrueBridge Capital Closes Fourth Venture Capital Fund-Of-Funds After Again Reaching $400 Million Hard Cap

Press Release | January 13, 2016
2015

Taking the Long View on Tech Investing [Podcast with Edwin Poston & Mel Williams]

a16z | June 15, 2015
2014

What We Can Learn From VC 'Unicorns' [Video with Edwin Poston]

FOX Business | October 30, 2014

TrueBridge Raises $408M for Fund of Funds, Foresees Seed Shakeout

Dow Jones VentureWire | September 10, 2014

TrueBridge Capital Partners Closes Third Fund at $400 Million Hard Cap

Press Release | September 10, 2014

Venture Capital: Where Is The Money Going? [Video with Edwin Poston]

FOX Business | July 23, 2014

Who's To Blame For The Tech Bubble? Silicon Valley Insiders.

New Republic | April 28, 2014

Innovation Comes From Venture: Profile of Edwin Poston by the Emory Alumni Association

EmoryWire | May 1, 2014

Is There a Bubble in Venture Capital? [Video with Edwin Poston]

Bloomberg | January 14, 2014
2013

Billion-Dollar Gains Reach 10 Venture Firms on IPO Boom

Bloomberg | December 20, 2013

Fewer Venture Capitalists Operating Today [Video with Edwin Poston]

Bloomberg | November 13, 2013

Insightly Raises $10M For CRM Service Wrapped In An Email App

TechCrunch | September 12, 2013
2012

Message To Venture Capital: Keep Shrinking

Forbes | October 25, 2012

TrueBridge Capital Partners Closes Second Fund at $342M

Press Release | January 12, 2012

TrueBridge’s Second Fund of Funds Good News For Kauffman Fellows

Dow Jones VentureWire | January 12, 2012
2011
2010
2009
2008