Coral vets start large equity fund -Minneapolis / St. Paul Business Journal http://www.bizjournals.com/twincities/stories/2002/12/09/story2.html?p... http://www.bizjournals.com/twincities/stories/2002/12/09/story2.html?p...
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SeeallnewslettersDec8,2002,11:00pmCST
Coral
vets
start
large
equity
fund
Mark
Reilly
Senior
Reporter
A
trio
of
venture-capital
veterans,
including
the
co-founder
of
Coral
Ventures
and
the
leader
of
its
health-care
investment
practice,
have
launched
a
private-equity
fund
targeting
the
life-sciences
sector.
Coral,
meanwhile,
will
likely
shift
more
toward
pure
technology
investments.
Lumina
Ventures
was
founded
earlier
this
year
by
Coral's
Managing
Partner
Peter
McNerney
and
General
Partner
Karen
Boezi
along
with
former
Warburg
Pincus
executive
James
Thomas.
According
to
the
firm's
Web
site,
the
group
plans
to
invest
12/29/2013 12:36 PM
1 of 5
Coral vets start large equity fund -Minneapolis / St. Paul Business Journal http://www.bizjournals.com/twincities/stories/2002/12/09/story2.html?p... http://www.bizjournals.com/twincities/stories/2002/12/09/story2.html?p...
in
medical-technology
and
health-care
businesses
in
various
stages.
Officials
at
Lumina,
which
has
offices
here
and
in
New
York
and
Palo
Alto,
Calif.,
would
not
comment
on
funding
goals.
But
industry
observers
and
others
who
have
seen
documents
from
Lumina
said
the
firm
is
trying
to
amass
up
to
$250
million
in
capital.
At
least
some
potential
investors
in
Lumina
are
known.
The
New
York
City
Employees'
Retirement
System,
which
controls
investments
of
$32
billion,
committed
$20
million
to
Lumina
last
month,
said
NYC
spokeswoman
Nicole
Lise.
New
York's
teachers'
retirement
fund
committed
an
additional
$15
million.
The
University
of
Michigan's
Board
of
Regents
voted
over
the
summer
to
invest
$15
million
in
Lumina.
It
is
unknown
whether
Lumina
has
actually
closed
on
those
deals
yet.
In
addition,
securities
filings
from
Lumina
made
earlier
this
year
refer
to
sales
of
limited-partnership
interests
of
roughly
$28
million
to
investors
in
Minnesota,
Illinois
and
Connecticut.
On
its
Web
site,
Lumina
states
that
it
plans
to
focus
on
sectors
such
as
pharmaceuticals,
medical
devices,
biotechnology
and
diagnostics.
Within
that
niche,
the
company
apparently
plans
to
cast
a
wide
net:
It's
looking
to
back
both
startups
and
larger
companies
as
well
as
fund
spinoffs
or
roll-up
deals.
It
looks
to
invest
between
$5
million
and
$25
million
in
companies,
but
initial,
early-stage
investments
could
be
as
small
as
$100,000.
Lumina's
launch
comes
at
a
time
when
venture
capitalists
are
faced
with
a
curious
dilemma:
Valuations
are
depressed,
making
new
investments
relatively
inexpensive.
Yet
the
sour
economy
has
left
many
investors
pessimistic,
making
it
hard
to
pull
new
funds
together.
Rick
Brimacomb,
president
of
Sherpa
Partners
in
Edina,
said
that
institutional
investors
might
be
hamstrung
from
joining
new
VC
funds
by
rules
governing
investment
allocation.
For
example,
consider
a
fund
that
puts
a
ceiling
on
VC
investments
of
15
percent
of
its
total
holdings.
A
manager
might
invest
12
percent
of
the
fund
in
venture
deals
and
think
there's
room
for
more.
But
if
a
falling
stock
market
lowers
the
value
of
the
fund's
public
holdings,
the
value
of
VC
investments
could
rise
above
15
percent
without
the
manager
doing
anything.
In
that
case,
Brimacomb
said,
"you
couldn't
put
money
into
a
VC
even
if
you
wanted
to."
Some
questioned
the
makeup
of
Lumina's
partnership.
Steve
Lisson,
editor
of
the
Austin,
Texas-based
news
site
InsideVC.com,
said
he
is
skeptical
of
firms
consisting
only
of
partners
with
financial
backgrounds
rather
than
those
with
recent
industry
experience.
"The
most
lucrative,
massively
returning
opportunities
are
always
the
smallest,
early-stage
investments"
that
can
be
missed
by
partners
without
recent
operational
experience,
he
said.
12/29/2013 12:36 PM
2 of 5
Coral vets start large equity fund -Minneapolis / St. Paul Business Journal http://www.bizjournals.com/twincities/stories/2002/12/09/story2.html?p... http://www.bizjournals.com/twincities/stories/2002/12/09/story2.html?p...
But
others
in
the
venture-capital
community
spoke
highly
of
the
strong
background
of
Lumina's
principals,
particularly
McNerney.
"Pete
has
a
reputation
as
one
of
the
truly
stellar
VCs
in
town,
especially
when
it
comes
to
the
medical
sector,"
said
Paul
Knapp,
president
of
both
Minneapolis-based
Space
Center
Ventures
and
the
Minnesota
Venture
Capital
Association.
McNerney
started
his
career
in
the
health-care
industry,
working
as
a
manager
for
Baxter
Healthcare
Corp.
before
founding
the
startup
Memtec
in
1986.
Lumina,
on
its
site,
touts
its
partners'
backgrounds,
noting
that
17
of
the
36
companies
they
worked
on
at
previous
firms
went
public;
another
seven
were
purchased.
Boezi,
who
joined
Coral
in
1994,
had
previously
worked
with
Thomas
at
Warburg's
medical
technology
group.
Thomas,
who
worked
at
Warburg
for
12
years,
has
led
deals
in
companies
such
as
American
Medical
Systems
of
Minnetonka
and
Xomed
Surgical
Products
Inc.,
Jackson,
Fla.
The
creation
of
Lumina
will
necessitate
a
shift
in
focus
for
Coral
Ventures,
the
sixth-
largest
VC
firm
in
the
Twin
Cities
with
more
than
$340
million
raised,
according
to
research
by
The
Business
Journal.
Since
its
founding
in
1983
by
McNerney
and
Yuval
Almog,
Coral
has
traditionally
maintained
twin
focuses
on
information
technology
and
health
care,
with
McNerney
and
Boezi
handling
health-care
portfolio
companies.
Observers
said
Coral
will
now
concentrate
its
future
investments
on
tech
ventures
(Almog's
preferred
area).
McNerney
has
said
that
the
decision
to
separate
from
Coral
was
based
on
the
view
that
smaller
VC
firms
shouldn't
spread
their
focus
too
thin.
The
equity
market
is
shifting
into
two
models,
he
said.
"One
side
is
large
firms
that
can
focus
on
multiple
sectors
because
they
have
the
staff
to
do
them
justice,
and
the
other
side
is
specialty
firms."
There
apparently
won't
be
a
change
for
Coral's
existing
health-care
investments;
McNerney
and
Boezi
will
continue
to
work
with
Coral
as
partners
of
its
existing
life-sciences
funds
and
work
with
its
portfolio
companies
in
that
sector.
Almog
could
not
be
reached
for
comment.
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WALTHAM'S MATRIX LEADING VENTURE PACK ON BOTH COASTS
Steve Lisson Austin Texas Stephen Lisson Austin Texas Stephen N. Lisson Austin Texas InsiderVC.com InsiderVC Insider VCWALTHAM'S MATRIX LEADING VENTURE PACK ON BOTH COASTS
FIRM CREDITS DISCIPLINE, INSISTENCE ON LEAD ROLE FOR STUNNING '90S RETURNS
Author: By Beth Healy, Globe Staff Date: 11/12/2000 Page: D1 Section: Business
BUSINESS & MONEY WALTHAM - Paul Ferri keeps two client letters framed on the wall behind his office door in this suburban haven of venture capital.
One letter, dated Sept. 12, 1994, informs the Matrix Partners founder that an overseas investment group would sit out that year's venture portfolio. Results in Fund II had not wowed the group, and it was "premature to make a judgment on Matrix Partners III."
Talk about an expensive decision.
The other letter, sent in April 1995, contains a rave from an elated American investor: "I have never seen a portfolio explode on the upside as has Matrix III in the past year."
Matrix hasn't opened its venture funds to new investors since. The firm has emerged as one of the best performers in the business, according to several investment sources, with a stunning 95 percent average annual return over the past decade. It's a record that rivals even the venture industry's Silicon Valley titans. And the returns on Matrix's latest fund appear to be unrivaled on either coast.
This is fighting talk in venture circles, where egos are huge and investment results are guarded like family secrets. But with the stock market in the doldrums and dot-com flops deflating venture returns after three sizzling years, it's a good time to take a peek and see who has really made money in this field.
Stephen N. Lisson, a writer in Austin, Texas, tracks top venture players on his Web site, InsiderVC.com, much to the chagrin of the venture firms. He has sparked controversy for researching and posting the returns on his site, but his numbers, when checked with independent sources, appear to be correct or in the ballpark.
According to Lisson's numbers, Matrix's Fund V, a $200 million fund launched in 1998, is the best venture fund of all time, with a 725 percent return. Lisson says it's really too soon to judge funds of the 1998 vintage because they're young and many of their portfolio companies haven't been sold or taken public, or left to die yet. Venture funds, after all, have 10-year lives. But in the case of Matrix V, he says, "Even if everything else in the fund tanked, the internal rate of return of 725 percent would stand."
This fund claims several hot deals, including telecom IPO juggernauts Sycamore Networks Inc. and Sonus Networks, which turned early-stage investments of $17 million into holdings worth more than $3 billion. Of the $450 million Matrix invested from funds III, IV, and V, about $220 million went into companies that have gone public or have been sold. That $220 million has returned more than $11.5 billion, the firm says.
Matrix partner Timothy Barrows says a sharp discipline kept the firm away from the dot-com mania that clouded the judgment of many venture firms.
"There are things we could have made money on," Barrows says. "We turned down Geo Cities," a company that helps people launch Web sites.
But Barrows and his six Matrix partners can only feel good about getting into telecom and optical firms early, focusing on infrastructure and, more recently, storage. The firm is famous for putting entrepreneurs from its past successes, like Cascade Communications and Apollo, to work at the new firms. And it simply won't do deals unless it's the lead investor, in first, with board seats.
The recipe has paid off handsomely for entrepreneurs, too. Matrix has helped create more than 2,500 millionaires at its portfolio companies. More than 40 of those people can claim a net worth exceeding $100 million, the firm estimates.
Ferri says the firm wasn't always this good.
To some extent, he understands why that overseas investor fired the firm in 1994. Matrix's first two funds posted above-average returns, he said, but they were nothing special.
"We looked like everyone else," Ferri says. "There was no reason anyone would come to see Matrix specifically."
But the firm was in the process of a makeover it had started in 1990. It decided to turn more attention to New England, instead of investing two-thirds of its assets in Silicon Valley. It stopped investing in medical devices and retail and focused only on high-tech start-ups. And it decided to do only hands-on deals.
"If we're not the largest investors in a deal, we're not in a deal," Ferri says.
Thirty years in the business has paid off, the 61-year-old veteran says. He's not at all surprised by the carnage and losses overwhelming the new entrants to the business, from fly-by-night incubators to start-up venture firms.
"It looks like an easy business to be good at," Ferri says. As a result, over the past few years, pension funds and other big investors have flooded venture funds with cash. "They've been giving money to a lot of people who don't have a clue as to what they're doing."
All the best firms do have a clue, of course. Other top funds of venture capital's record decade include Sequoia Capital's Fund VIII, with a return of nearly 402 percent, and Kleiner, Perkins, Caufield & Byers' Fund VIII, with a return of 350 percent. These two firms are considered the most successful and most experienced of Silicon Valley.
Lisson's long view, assessing all the top firms over the past decade, is this: "Vintage year after vintage year, fund after fund, there is no question that Sequoia and Matrix will be at the top."
People who run university endowments and foundations corroborate Matrix's reputation. In the same company, venture experts put Boston's venerable Greylock Management Corp.; North Bridge Venture Partners of Waltham; Kleiner, Perkins; Benchmark Capital Partners - the Silicon Valley firm of eBay fame - and Redpoint Ventures, also of the Valley.
In the next breath come Battery Ventures of Wellesley, Charles River Ventures of Waltham, and Oak Investment Partners of Westport, Conn.
There are dozens of other fine firms with great returns. But only one can be the best. One Boston endowment investor who has money in many top venture funds - speaking on condition of anonymity, so he wouldn't anger several successful and hyper-competitive venture players - says of Matrix, "The last three funds have been extraordinary."
"Matrix," he adds, "is in a league of their own."
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2 days ago - "Even after a first day's trading, VCs still have a lot of work and uncertainty ahead of them," said Steve Lisson, president of InsiderVC.com, based in Austin, Texas ...Sunday
Stephen N. Lisson
Steve Lisson, STEVE LISSON, AUSTIN, TX, STEPHEN N. LISSON, TRAVIS
COUNTY, TEXAS, LISSON STEPHEN N., STEVE N. LISSON, STEVE, LISSON,
INSIDER, VC, INSIDERVC, INSIDERVC.COM
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Lisson, STEVE LISSON, AUSTIN, TX, STEPHEN N. LISSON, TRAVIS COUNTY,
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