Tuesday, August 19, 2008

Venture Capital: "Garbage In..."

From Forbes:

A late-stage venture funding outfit is foisting junky startups on investors--much to the benefit of the Sand Hill Road crowd.

It's just the sort of improbable success that Silicon Valley adores. Two young entrepreneurs have, in a mere five years, turned an obscure Chicago venture capital firm into a presence visible from Sand Hill Road. This year Keith Daubenspeck and Dwight Badger's Advanced Equities Financial is on track to raise $1 billion for startups previously backed by industry Brahmins like Kleiner Perkins Caufield & Byers, Benchmark Capital, New Enterprise Associates and Vinod Khosla.

In the process, closely held AE earned operating income (Ebitda) of $26 million last year on $300 million in revenue. Daubenspeck is ranked 72nd on the 2008 FORBES Midas 100 list of top tech dealmakers. He hopes to take AE public within 18 months....MUCH MORE

HT: Valleywag who write:

...But what speaks most to Daubenspeck and Badger's bad business judgment is this talk of going public. In the last bubble, CMGI, an Internet holding company with a large venture-capital arm, posted overheated returns by flipping its startups for cash, and then crashed all the more quickly when the tech-IPO market seized up. With private equity abundant, why would Advanced Equities even want to tap the public markets? Especially with the scrutiny that would mean. If Forbes was able to find all this dirt with a little digging, imagine what the company would look like under the glare of analysts and short-sellers.