Sunday, May 10, 2015

TINDER | Steve Lisson

Friday, May 15, 2015

Scenes from the INITIATE!! Salute to the Dream Team of Austin High-Tech

Steve Lisson
Steve Lisson

Vol. 1, No. 1: Table of Contents | Steve Lisson

INITIATE The Management Magazine for Technology Ventures, Corporate
Intrapreneuring and Sources of Capital
VOL.1 NO.1 Contents Premiere Issue
Inside this Issue
How to subscribe to INITIATE!!
INITIATE!!'s "Thank You"
Company Index
Index to Advertisers
Cover Story: "The Dream
Team"--Austin's Best and Brightest
Technology Executives
A profile of 50 executives named by their
peers to management positions in a mythical
all-star corporation.
Dream Team II' CEO??
Interview: Kenneth P. DeAngelis,
General Partner, Austin Ventures
"Again, some of these questions I can'
answer because it would take days to talk
about them."
Scenes from the
Salute to the Dream Team of
Austin High-Tech
Jim Truchard Tom Seidel Frank King
Jim Clardy Steve Lisson
Laura Kilcrease Jim O'Neill
Interview: James J. Truchard, Ph.D.,
Chairman & CEO, National Instruments
"We came up with a theory of how we could
be successful."
Managing Close To The Ice
by W. Frank King, Ph.D.
"Two years ago I would never have said: ''t
delegate! Do it yourself! Act! Make it
happen! Don' deliberate! Change!'"
So You Want To Be A (Multimedia) Star?
by Charles D. Huston, Esq.
"Time Warner, Disney, Sony and the like
have bevies of agents and lawyers to sort out
the licensing issues--you don'. So here are
some guidelines that might help in your quest
for content."
Intellectual Property Protection For
Computer Technology After NAFTA
by Jerry M. Keys, Esq.
"The enforcement provisions of NAFTA may
be the most important provisions applicable to
the protection of intellectual property."
Questions or Comments?
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Vol. 1, No. 1: Table of Contents

Monday, January 5, 2015


Blogger: User Profile: Steve Lisson Austin TX



Rumors of Benchmark's Demise Greatly Exaggerated

For weeks, rumors have been circulating in the VC community that Benchmark Capital's third fund, Benchmark III, was in trouble, hit hard by losses in e-commerce companies like

Benchmark denies the rumors, and its limited partners say they never received the rumored letter that the fund was in trouble. An analysis of Benchmark's portfolio appears to back up the firm, which despite the rumors, may not just be surviving, but thriving.

Benchmark declined to discuss details, but the firm's holdings as of June 30 were provided by Steve Lisson, the editor of, who tracks the performance of leading venture firms for high-paying clients.

At first glance, Benchmark III had its share of overvalued B2C e-commerce firms like (Nasdaq:FLWS) and was the fund's biggest investment, at $18.9 million, and had been marked down to $8.1 million on June 30. The stock price has declined about 30% since then. "There are many private scenarios just like this public one, whereby even if the company can be kept afloat long enough to enjoy some success and eventually make it to a liquidity event, the venture investors will lose money," Lisson said.

But a closer look at Benchmark III reveals a fund with several potential winners, including Internet Data Exchange System company CoreExpress, an intelligent optical networking play. That investment alone could return limited partners' money. Other potential winners include Sigma Networks,, Netigy and BridgeSpan.

And Benchmark's newest fund, Benchmark IV, is already showing the markings of a winner, thanks to investments in Loudcloud, Netscape co-founder Marc Andreessen's latest venture, and TellMe Networks, whose valuation no doubt went up in its recent $125 million funding round.

Lisson said the Benchmark rumors reflect a misunderstanding of how venture funds operate. "There's a reason these are 10-year funds," he said. "It's called risk and illiquidity. The one monster hit could happen three, four or five years out. You can be wrong about 39 of 40 companies, and the market uncooperative, as long as one is an Inktomi. That is the history of this industry: one monster hit returning the entire fund. Singles and doubles won't get you there."

At two years of age, Benchmark III still has plenty of time to deliver a big winner. In the meantime, the firm's limited partners can enjoy the returns from Benchmark II, a three-year-old fund that has already distributed five times its partners capital, by Lisson's estimate. Benchmark II boasted big winners like Handspring (Nasdaq:HAND), Critical Path (Nasdaq:CPTH), Red Hat (Nasdaq:RHAT), and Scient (Nasdaq:SCNT). Yes, Scient. Benchmark had the foresight to distribute shares of the Internet consultant to its limited partners at 200-300 times the firm's cost.

Benchmark isn't any different from other venture firms, most of whom "drank the Kool-aid" of seemingly easy dot-com money, hoping the stock market would hold up long enough to vindicate those investments. But Lisson expects that some other firms won't hold up as well. He expects a shakeout in the industry similar to the one that hit the industry from 1987-1991, when venture firms formed during the 1980s averaged single-digit returns, and roughly 20% of new entrants couldn't return their partners' capital. VCs' own fundraising declined from $4.2 billion in 1987 to $1.3 billion in 1991. The $4 billion level of capital coming into the industry wasn't reached again until 1995.

"This is what's supposed to happen in a downturn," Lisson said. "People who shouldn't be in the business, who contributed to the excesses and didn't know what they were doing, will be forced out. It's not like this is the first time we've seen too many new entrants into the industry, or too much money chasing too few deals." And the ones that survive will have a chance to prove themselves in tough times, the ultimate mark of a winner.

Lisson said a few venture firms stand out among their peers. Matrix Partners, Kleiner Perkins Caufield & Byers and Sequoia can normally be found at the top of the charts in each vintage year they raise a fund, he said, proving that "something's in the water" at those firms. And he gives Oak high marks for consistency over a long period of time.

But even top firms have an occasional weak fund, Lisson said. "But by the time you can make that judgment about a fund, you'll have raised another fund and shown some early progress," he said. Meaning that even if Benchmark III was a weak fund, Benchmark IV could keep the firm in its limited partners' good graces for some time to come.

"The moral is consistent performance over time relative to same vintage-year peers," Lisson said. "You're never as good or as bad as your current press clippings might indicate. The real test of Benchmark's mettle will come when we can fairly evaluate whether the firm manages through and makes money, not just with small funds during the best times in the industry's history, but with larger funds in the tough times ahead as well."


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Monday, December 22, 2014


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Saturday, December 6, 2014


STEVE LISSON, December 2014

Tuesday, November 25, 2014


RED HERRING Updated Jun 24, 2014, 11:11 AM


How to rate a venture capital firm
By Lawrence Aragon
April 16, 2001

Red Herring explains how it came up with its list of top venture capital firms
for the 2001 version of the Red Herring 100: Kleiner Perkins Caufield and
Byers, Accel Partners, Matrix Partners, Sequoia Capital Partners, and runner-
ups Oak Investment Partners, Mayfield, Greylock, Menlo Ventures, North
Bridge Venture Partners, and Benchmark Capital.

Venture capital is like baseball without the stats. There are great arguments
about who's the best -- and worst -- VC around. But unlike baseball fans, those
who follow venture capital have scant data on which to base their opinions.

Until now.

As part of our annual Red Herring 100, we set out to determine the top ten VC
firms using the best metrics we could come up with. To our knowledge, this is
the first time anyone has come up with a list based on more than a single
metric, such as the internal rate of return (IRR).

Before we get into each of the ten factors we examined, allow us a brief
explanation as to why we didn't include the most common metric: IRR. IRR is
a number determined by each VC firm, and although it's bandied about
frequently, it can be easily tweaked to make a firm look like it's doing better
than it actually is. It isn't uncommon for a VC that isn't performing very well to
inflate its IRR by counting its own "carry," the money it makes from
investments, into its IRR.

The only real way to know how a VC firm is performing is to look at its
disbursements to its limited partners (LPs). This is the actual stock or money
that VCs get from a liquidity event -- that is, a portfolio company's IPO or its
sale to another company. The only problem is, VCs don't want to share this

Enter Steve Lisson, editor of, a venture capital research firm.
Mr. Lisson has been able to infiltrate the closemouthed community of LPs and
get its members to share disbursement figures. We asked Mr. Lisson to come
up with a list of the best ten VCs in the country, based on disbursements to LPs
and how consistently they have returned the big bucks to LPs.

Here, then, are the top ten venture capital firms: Kleiner Perkins Caufield &
Byers, Accel Partners, Matrix Partners, Sequoia Capital Partners, Oak
Investment Partners, Mayfield, Greylock, Menlo Ventures, North Bridge
Venture Partners, and Benchmark Capital. The top four firms (the first four
listed) made it into the Red Herring 100. Now, on to our criteria: underneath
the chart just below we review in depth the ten factors we rated the companies

1. Kleiner Perkins Caufield &
Byers 10 10 10 6 10 9 10 5 10 109.09
2.Accel Partners 9 9 8.58 10 9 9 5 10 108.77
3. Matrix Partners 9 10 10 9 5 10 10 10 4 6 8.36
4. Sequoia Capital Partners 6 10 9.5 8 10 7.5 10 5.5 2 4 7.14
(tied) Oak Investment
Partners 8 10 6.5 10 2 5 10 7 2 107.14
(tied) Mayfield 7 10 9.5 7 10 8 10 6 0 4 7.14
7. Greylock 6 10 10 9 4 9 10 7 6 0 7.00
8. Menlo Ventures 8 10 5.5 8 3 10 6.5 7.5 2 2 6.41
9. North Bridge Venture
Partners 7 3.5 10 7 6 9 8 9.5 0 2 6.27
10. Benchmark Capital 7 3 6.5 7 3 8 1 4 10 2 5.32
Average7.7 8.55 8.6 7.9 6.3 8.45 8.45 6.65 4.6 5 7.26

1 The disbursement category is weighted twice that of other categories. Data from Steve Lisson,
editor of
2 Operating experience counts VP level and above.


Mr. Lisson gave a score of 10 to just one VC firm: Kleiner Perkins Caufield &
Byers. Benchmark Capital, which has had some monster hits in the past couple
of years, scored a 7, because it has only been around for six years.


In the venture business, age counts for a lot. It means a firm has been battle-
tested and has done well enough to get its LPs to continue investing. We took
each firm's number of years in business and divided that figure in half to come
up with a score (with a maximum score of 10). Six firms earned a 10. Two firms
came up short: Benchmark and North Bridge Venture Partners, with scores of
3 and 3.5, respectively.

Pressure to invest.

A general partner is better off if there isn't pressure to put a lot of money to
work. We divided the amount of a firm's current fund size by its number of
general partners, then assigned a value to the resulting figure. After talking to
several VCs, we determined that $90 million per partner was reasonable to
assign a score of 10. We gave a 9 to anyone managing $110 million, an 8 to
those managing $130 million, and so on.

VC experience.

This should be self-explanatory as to why it's important. We gave general
partners with 15 years or more of experience a score of 10. Those with 12 to 14
years received a 9, and so forth. Oak Investment Partners came out on top in
this category, with an average of 17 years for its partners. Even though Kleiner
has at least three partners with more than 20 years of experience, its score got
knocked down to a 7 because it recently added some technology executives to
its partnership.

Operating experience.

With so many portfolio companies in trouble these days, every VC firm needs
partners who've been in the real world to advise troubled companies. We gave
each firm a point for any general partner with operating experience, plus a
bonus point for any partner who qualified as a "star." General partners who fell
into the star category include Kleiner's Ray Lane, former president and chief
operating officer (some say the de facto CEO) of Oracle, and Mayfield's Janice
Roberts, who ran Palm when it was a division of 3Com.

Board seats.

Six boards is the maximum number you can sit on and still actually contribute
valuable time and energy, we're told by veteran VCs. Menlo Ventures and
Matrix Partners were the only firms whose partners sat on an average of six or
fewer boards, giving them perfect 10s. We gave firms whose partners held an
average of seven to eight board seats a score of 9, and so on. Oak fared the
worst: its six general partners sit on an average of 12 boards each.


This is one of those categories that VCs like to brag about, but it can often be
misleading. Two firms may be in the same IPO, but one may own 15 percent of
a company while another owns 1 percent. The only real way to know how well a
VC did in an IPO is through disbursement figures. Still, we felt we should give
VCs some credit for liquidity events. We gave a firm one point for every $1
billion in value, with a maximum of 10 points for $10 billion. IPO figures were
based on the close on the first day of trading. Sale prices were based on the
value on the day the deal closed. A lot of moonshot IPOs have fallen back to
earth, so this category is squishy at best.

Lack of portfolio problems.

Matrix was the only firm on our list that had no failed or troubled companies.
We gave each firm 1 point for every failed company and half a point for every
company that had laid off employees in the past year. We then subtracted that
total from 10. Benchmark fared the worst in this category with a score of 4.
Blame it on those Internet bets like,, and

RH 100 factor (2000 and 2001).

VCs deserve credit for portfolio companies that show great promise. Because
the staff of Red Herring spent weeks vetting all of the companies that made the
Red Herring 100 list, we used the private portion of the list (50 companies) in
2000 and 2001 as a basis for determining potential hits. For every portfolio
company on the Red Herring 100, we gave a firm 2 points, with a maximum of
10. Kleiner and Accel Partners were the only firms to receive 10s for both years.
Kleiner had the most companies on this year's list: Zaplet, Epoch, Synaptics,
SmartPipes, Asera, and Bowstreet.

As much time as we spent thinking about how to create a top ten VC list, and
then double- and triple-checking the data, we'd be nave if we didn't expect
some VCs to take issue with our numbers or our methodology. So, don't feel
shy about expressing your opinion.

Write to

Note: In the "Top 10 VC Firms" on page 185 of issue 97, Menlo Ventures
should have been ranked No. 8 and North Bridge Ventures should have been
No. 9. In addition, we did not make it clear that three firms tied for 4th place:
Sequoia Capital Partners, Oak Investment Partners, and Mayfield. The data
is correct here.



Copyright 2014 RHC Media, Inc.


Thursday, October 30, 2014



Steve Lisson, Stephen N. Lisson

Behind the VC Music
By Mark Gimein

Stephen Lisson is not a conventionally likable guy. On more
than one occasion, he's implied that I'm the single stupidest
reporter he's ever talked to. He has kept me on the phone for
hours at a time listening to the most arcane statistics, until I've
slammed down the phone in frustration. He calls people who
disagree with him "lickspittles." He dismisses many of the
visitors to his Website as "parasites."

And yet over the past few months I have repeatedly gone back to
Lisson and his new Website,, because Lisson has
the best data out there about venture capital, and often the most
interesting things to say about it.

Venture capitalists are the rock stars du jour of the financial
world, a species of money managers who are believed capable of
superhuman wisdom. Business magazines tend to assume that
the richer you are, the smarter you must be, and the Internet
boom has lavished untold riches on the venture capitalists who
invested early.

"Untold" is a key word here, because hardly anyone knows
exactly how great these riches are. In this way, venture-capital
funds are very different from, say, mutual funds. Venture
capitalists talk vaguely about "triple-digit returns," but even
successful funds tend to keep their returns a closely guarded
secret. And even when they do reveal numbers, they can be hard
to understand.

This is where Austin, Texas, entrepreneur and venture-capital
gadfly Stephen Lisson comes in. Through years of research and,
apparently, a lot of cooperation from a network of sources
willing to send him copies of the reports that venture-capital
firms send out to their investors, Lisson has gathered an
immense database of information about venture-capital firms'
investments and profits.

Lisson doesn't make all his data public--much of his information
is limited to subscribers, and he can be picky even about whom
he allows to subscribe. But what he's already revealed in the
public sections (for example, see: Database Example) of is fascinating. Some of his data shows exactly
what you might expect. Benchmark Capital Partners' 1995 fund-the
fund that famously invested in eBay--has already returned to
its investors 38 times the money they put in. Investors who put
money into the fund that Kleiner Perkins Caufield & Byers,
Silicon Valley's best-known venture-capital firm, raised in 1996,
have already made a similarly spectacular return of over 1,000%.

But you'll also find that the 1997 fund raised by Hummer
Winblad, another venture-capital firm that has traditionally
received a lot of attention from the press, has so far returned
only 42% of its investors' money. That might be a decent
showing in any other era, but in the middle of the biggest
technology boom or bubble in history, it's not great, and not
nearly as good as some of Hummer Winblad's peers. (Typically,
venture funds distribute cash or stocks as the companies in their
portfolio are sold or go public. In theory, that means they can
continue paying out money to investors for a very long time, but
in practice, almost all of their profits are made in the first six
years of the fund.)

Even more interesting are the data that Lisson has gathered on
how venture capitalists value their investments. Venture
capitalists measure their own performance by an "internal rate of
return"--an annualized rate of increase in the value of their
investments. Often that'll be a number in the high double digits,
sometimes in the triple digits. Sounds pretty good when you
compare it with the typical mutual fund. But if you look at the database, you'll find that funds claiming
immense annual returns sometimes pay out a lot less money to
investors than you'd imagine.

As of March 2000, Benchmark claimed an annualized return of
an amazing 279% for Benchmark III, the fund that the firm
raised in 1998. But wait a second! Lisson's data also show that
Benchmark III hadn't actually distributed any cash or stock to its
investors. That 279% return was based on a guesstimate of the
value of the companies Benchmark has invested in--companies
that, since they hadn't gone public, are notoriously hard to value.
One of those companies,, has already gone bankrupt,
reducing the value of Benchmark's investment from an estimated
$74 million to zero. And it's hard to believe that, with the Net
bubble bursting, Benchmark's investment in is really
worth the $20 million-plus that Benchmark valued it at in

For individual investors who don't have a prayer of putting their
money into funds that deal only with tech insiders, large
institutions, and foundations, analyzing exactly how much the
top funds make can certainly seem like an academic exercise. It
can all sound arcane, confusing, and dull, and if you are not an
investor in venture-capital funds, I don't recommend it as a
hobby or a business. But it's important that somebody do it.
First, because venture investment is the engine driving much of
Silicon Valley's technological innovation. And, second, because
it's important for somebody like Lisson to remind investors and
the business press that venture capitalists are not the gods of
finance they are often made out to be, but instead, very well-
trained money managers. Sometimes very smart money
managers, sometimes very lucky money managers, but
nonetheless, financiers who'll often make a lot of money and
sometimes, like the rest of us, flub it.

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