Compete.com sale a champagne moment? Not at ~8% per year return it’s not.


Update:  Silicon Valley Insider is reporting that there is an additional 75MM in the deal as an “earnout” over the next several years.   That may make this deal sweeter than it appears at first.

At first glance you’d think the sale of website COMPETE.com, which measures web traffic, for 75MM must have been a big payday for a lot of folks.   However as Venture Beat notes some 43MM of venture capital had been poured into  COMPETE over the past 8 years.  

Assuming most of this came at the beginning of the cycle, and assuming most of the 75MM is going to the VCs, the return on this VC investment would be a very modest 8-10%.    If the founders and workers also had a decent stake in the sale this return could be lower – approaching what the VCs might have realized with long term CDs over the same time period.     Break out the champagne?

I’ve noted before the dirty little secret of many “successful” venture capital deals – they often make a very modest return when time is factored in properly.   In fact it appears that *most* VC deals lose money for the players.    Data is sketchy, and obviously only the winners are happy to share the details making it very difficult to analyze this since many (most) of these deals are not in the public record.  

Sure there are VC winners like Fred Wilson and Jeff Clavier, both very clever VCs who blog some of the details of their failures and successes.    However I think this is not typical, as Jeff even suggested here at the blog some time ago.

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About JoeDuck

Internet Travel Guy, Father of 2, small town Oregon life. BS Botany from UW Madison Wisconsin, MS Social Sciences from Southern Oregon. Top interests outside of my family's well being are: Internet Technology, Online Travel, Globalization, China, Table Tennis, Real Estate, The Singularity.
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One Response to Compete.com sale a champagne moment? Not at ~8% per year return it’s not.

  1. asdf says:

    liquidation preference.

    median_ VC fund returns = ~15%, compounded annually. upper quartile VC fund returns = 30%, compounded annually. top dog VC fund = measured in X, not %, compounded annually.

    those numbers above don’t support claims of VC returns being modest.

    early stage IT is different from late stage life sciences.

    deal data is absolutely not sketchy. funds must report to LPs. and there’s oodles of data available to the greenest researcher.

    take 5 deals in an average IT fund.. 1/5 deals = total loss, 2/5 deals = partial loss/break-even, 1/5 deals = moderate gain, 1 deals = blowout gain

    success by definition is not typical.

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