Discussion of Firms and Life in SF/SV

Originally posted by Gattigap
Hug, hell. Give the LPs a hug.

If you see the VCs, ask them why they only did 2 new deals in the past year while they lived off that 2% management fee.

Also ask both the VCs and the LPs how they feel about clawback provisions.

[AngryMulletMan]

Is anyone actually aware of LP's exercising rights under a clawback provision? Some seem to be under the impression that this is the stuff of urban legend. Seems like you'd have to have GP's who 1) took more than the standard take (whatever that was) and 2) have enough personal assets. OTOH, things could get interesting over at Scary Larry's Funhouse.

Since it's out of my area of expertise, I have no clue what the trend is here.

AM(showing my ignorance again)M

Originally posted by AngryMulletMan
Is anyone actually aware of LP's exercising rights under a clawback provision? Some seem to be under the impression that this is the stuff of urban legend. Seems like you'd have to have GP's who 1) took more than the standard take (whatever that was) and 2) have enough personal assets. OTOH, things could get interesting over at Scary Larry's Funhouse.

Since it's out of my area of expertise, I have no clue what the trend is here.

I don't know what the general trend is, but I do recall seeing articles saying that a handful of major funds reduced management fees to offset amounts that would be owed under clawbacks. I believe TA Associates, Battery and others were on the list. Presumably, there are also more of these battles being fought behind the scenes. For a while there were rumors that some large fund GPs were in big financial trouble because of clawbacks, but I haven't heard those rumors in a while. I've also heard that the fund groups at a number of law firms have been busy for a while with restructurings, reworking fees, figuring out what to do with defaulting LPs, etc.

[Gattigap]

Originally posted by I like Pooh
I've also heard that the fund groups at a number of law firms have been busy for a while with restructurings, reworking fees, figuring out what to do with defaulting LPs, etc.

Similarly, I've heard that some LPs have told their VCs not to do another capital call anytime soon because they can't/won't make it now, which would trigger a default.

And then what? In this funding environment, you don't want to go down that road.

[Seven of Nine]

Anybody else know Hank Barry, a former WSGR attorney who joined Hummer and served as CEO of Napster? I hate to see something like this happen to him (and to a lesser extent Hummer). But, he had to see it coming.

I think that the outcome of this case could drastically change the way VCs operate their businesses. What say ye?

Seven


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Record labels sue VC firm over Napster support
By Dawn C. Chmielewski
Mercury News


Two record labels filed suit Monday against Hummer Winblad Venture Partners, accusing the venture capital firm of contributing to widespread Internet music piracy through its financial support of Napster.

Universal Music Group and EMI Recorded Music accused the firm -- and partners John Hummer and Hank Barry individually -- of perpetuating global piracy through its $13 million investment in the controversial file-swapping service.

``Businesses (as well as those individuals or entities who control them) premised on massive copyright infringement of works created by artists, should face the legal consequences for their actions,'' the labels said in a joint statement.

Filed in L.A.

The lawsuit, filed in U.S. District Court in Los Angeles, is another in a new round of litigation that has arisen after Napster sought the haven of bankruptcy court in June. That filing resulted in an unresolved end to copyright infringement lawsuits the five major record labels brought, seeking billions in damages. Joining Universal Music and EMI Music in the December 1999 suits to shut down Napster were Sony, AOL Time Warner and Bertelsmann.

But the lawsuits -- like the unauthorized music downloading itself -- didn't stop with Napster's financial collapse. Two prominent songwriters sued Napster benefactor Bertelsmann for $17 billion in February, accusing the German media conglomerate of deliberately helping users of the wildly popular service violate copyrights.

That suit alleged that without Bertelsmann's $90 million investment, Napster would have collapsed in July 2001, and fewer songs would have been downloaded.

Monday's suit seeks to hold Hummer Winblad, which backed Redwood City-based Napster, its one-time chief executive, Barry, and former board member Hummer accountable for what the labels describe as unprecedented global piracy.

A Hummer Winblad spokesman issued a brief statement saying, ``We've received a copy of the complaint and we are reviewing it.''

Possible defense

Sources close to the venture capital firm predict that Hummer Winblad will likely raise the defense that, when the firm invested in Napster in April 2000, there had been no court ruling on the legality of the song-swapping service.

The National Venture Capital Association, in a recent letter to Sen. John Kerry, D-Mass., wrote that the mere threat of such litigation against one limited partnership firm would shrink the flow of capital to the entire technology segment.

``The uncertainty attendant to those pending lawsuits is deterrence aplenty to the flow of investment capital to new technology,'' wrote association president Mark Heesen. ``Even without the threat of direct suit, investors in innovative technologies face the very real risk of loss of their investment.''

:box:

[Sidd Finch]

Originally posted by Tyrone_Slothrop
So if you see a VC, give them a hug.

If the LPs sue the VCs, and the VCs hire me to defend them, I'll give them a great big hug.


Sidd(billing the time, of course)Finch

[AngryMulletMan]

Don't forget National Secretar... um... National Admin... er... to send flowers, candy, wine or thong panties to your assistant tomorrow, unless you want em to hate you until hell freezes over.

Oh, and even if your firm does not celebrate it, your assistant will damn well know what day it is.

AM(lucky have one who is golden and thanking my lucky stars)M:bow:

[Sidd Finch]

This morning's Recorder says that Chevron's "go to" litigator has hopped from Pillsbury to Jones Day.

Should we have a pool on how long it takes for Pillsbury to announce that the guy was (1) a harasser and (2) not really all that productive anyway?

Sidd(those GraPes are sour, I say!)Finch

[sgtclub]

Originally posted by Sidd Finch
This morning's Recorder says that Chevron's "go to" litigator has hopped from Pillsbury to Jones Day.

Should we have a pool on how long it takes for Pillsbury to announce that the guy was (1) a harasser and (2) not really all that productive anyway?

Sidd(those GraPes are sour, I say!)Finch

Smart move on his part, as the relatively new GC at Chevron is a former Jones Day lawyer, the first non-Pillsbury GC there in years. A better pool is how long it will take Pillsbury to have a liquidation event. It's my understanding that Chevron has kept them afloat the last few years.

[Seven of Nine]

Originally posted by sgtclub
A better pool is how long it will take Pillsbury to have a liquidation event. It's my understanding that Chevron has kept them afloat the last few years.

PMS is too evil to liquidate. Wickedness alone will keep them alive for years to come. However, I bet their rate of attrition keeps climbing for the forseeable future.

Seven

SF to PA

[Tyrone Slothrop]

So says the Chronicle:

As the debate simmers over whether the housing market is likely to slump, the median price for a Bay Area home reached a record $419,000 in March, according to a real estate information firm.

The previous high -- $417,000 -- came last summer.

* * * * *

DataQuick researcher John Karevoll said the market is relatively stable, and he sees no signs of a crash. "When you see home prices going up 25 percent, like we had in 1999 and 2000, that's not sustainable, but 10 percent we can live with for some time," Karevoll said, referring to the year-over-year increase in the Bay Area median.

Bless you, Mr. Karevoll. No more crashes here, please.

[Atticus Grinch]

Ain't gonna be no 10% any time soon. Average household income isn't rising 10% annually, front-end ratios aren't going to rise by 10% of current levels annually, and interest rates sure-as-shit aren't going to be falling by 10% of the current level, like, ever.

The bump from last year is due to the interest rate drop, period. Does this analyst idiot think that rates are going to stay sub-6 forever? I smell a return to last year's prices when the 30-year jumbo rate hits 7 again.

[Note: This opinion may not be read by anyone attempting to buy my house, or any comparable house in my neighborhood.]

[SlaveNoMore]

Atticus Grinch
Ain't gonna be no 10% any time soon. Average household income isn't rising 10% annually, front-end ratios aren't going to rise by 10% of current levels annually, and interest rates sure-as-shit aren't going to be falling by 10% of the current level, like, ever.

I read just yesterday that rents in the City are down 9% and still declining.

Buy up/Rent down. Go figger.

not7yS

[Sidd Finch]

Originally posted by SlaveNoMore
Buy up/Rent down. Go figger.

Been that way for awhile -- very difficult to understand why (for me at least, tho' I'm kinda slow).

If I had any guts, or less inertia, I'd sell my home and rent for awhile until housing prices tumble back to reality. Hell, the place next door to me, with an identical floor plan, has been on the rental market for nearly a year now.