Glenn Solomon, a partner at GGV Capital who also has a blog Going Long, yesterday posted an article on Fortune called "Is your Company IPO ready" that I found interesting.  Rather than focusing on whether a company has a $100 million revenue run rate, which many banks used to use as a metric (along with several quarters of profitability), Glenn identifies three key attributes that the company must have to go public: (1) predictability and visibility; (2) underlying growth potential; and (3) no single points of failure (no significant vulnerabilities).  It's a good and useful article.

From my investment banking days at Bear Stearns and CIBC Oppenheimer during the Internet bubble, these points ring true. However, while these may be three key attributes that a company must have in order to go public, they are by no means the only attributes a company must have in order to be ready to hold a successful initial public offering.  Other attributes could include a phenomenal management team, differentiation from competitors, strong IP portfolio, impressive and consistent financial performance (for most tech companies this is rapid revenue growth), real cash revenues (no reciprocal agreements), operating in a large, rapidly growing market, sterling reputation, well-developed internal business processes and controls, and on and on.  And while a tech company may not need $100 million in current revenue run rate to go public, they should be close (for example, a $20 million revenue run rate won't do it, but if a company has all of the other attributes, perhaps a $70 million revenue run rate might be sufficient).  There are a lot of pieces to the puzzle that are required to fit for a company to be ready to go public and have a successful IPO, and the three attributes that Glenn identifies in his article are essential.

Here's a link to the article:  
http://finance.fortune.cnn.com/2013/02/25/are-you-ipo-ready/

Fred Wilson, a principal of Union Square Ventures, posted yesterday on his blog A VC his thoughts on "Venture Capital Returns."  Using data from Cambridge Associates, he looks at one quarter, one year and 10 year returns for venture capital compared to DJIA, NASDAQ and the S&P 500.

He notes that the performance of early stage funds is disappointing.  For the period ending 9/30/2102, early stage funds have one quarter returns of 1/4%, one year returns of 13.2% and 10 year returns of 3.9% compared to NASDAQ returns of 6.2% (one quarter), 29.0% (one year) and 10.3% (10 year).  Early stage investing is hard, he states and asks that entrepreneurs have some empathy for VCs.

One thing I think is important to note is that these numbers are aggregate numbers and are intended to represent the overall industry.  Most LPs are looking to invest in top-quartile or top-decile managers, where the alpha achieved by these managers can add 700 to 1000 bps, or much more, to the returns.  So yes, early stage venture is hard, but the best managers (and I believe Union Square Ventures to be in this group) will still be able to provide exceptional returns to their LPs.

Here's a link to the post:  http://www.avc.com/a_vc/2013/02/venture-capital-returns.html

The recent Businessweek interview "Charlie Rose Talks to Sequoia Capital's Michael Moritz" is a short but interesting conversation with one of the leading figures of venture capital.  One interesting comment he makes in the interview was that it wasn't uncommon for Sequoia to hold investments for 10 years or more, and that it's not uncommon for the partners of Sequoia to own stock for 15 or 20 years.  To me this highlights something that many investors in venture capital funds don't truly consider - that the life of a typical venture capital fund can be much longer than the 10 year stated term in the limited partnership agreement.  Some funds have changed the term to 12 years, and most funds contain extensions to the initial term of two to four years.  Investors in venture capital funds should be aware that the time from the initial capital call to the final distribution can be as long as 15 or 16 years, or even sometimes longer.

Here's the link:  http://www.businessweek.com/articles/2013-02-07/charlie-rose-talks-to-sequoia-capitals-michael-moritz

Sandy Miller of Institutional Venture Partners has recently posted an insightful piece on the current status of the IPO market and what must occur for the IPO market to really recover.  It appeared on AllThingsD.com on Jan. 23, 2013 and is titled "Stop Bashing the IPO Market - It's Ripe for Recovery."  He uses an analogy of a three-legged stool, and finds that two of the legs are in place (an abundance of venture-backed innovative growth companies and a favorable regulatory environment), and that the third leg of the stool, the investment banking system, is where the effort needs to focus.  It's a well-written, insightful article and worth a read.  Here's the link:  http://allthingsd.com/20130123/stop-bashing-the-ipo-market-its-ripe-for-recovery/

Dell Inc. is going private in a $24.4 billion deal led by Michael Dell and private equity firm Silver Lake.  This is the largest buyout since the financial crisis and the biggest since Hilton Hotels were acquired by Blackstone Group in the summer of 2007 for $26 billion.  Michael Dell is rolling over his existing 14% equity stake in Dell and will contribute additional cash from his private investment vehicle, MSD Capital.  Microsoft Corp. is loaning $2 billion to the deal.  Additional debt financing will be provided by Bank of America Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets.  The sponsors are offering $13.65 per share, which represents a 25% premium over the stock price when the news of the discussions leaked out, but a small premium over recent trades.

Dell is the third largest personal computer maker, behind Hewlitt Packard and Lenovo.  By going private, Dell will have more flexibility to transform the business that he started while he was in college in 1984.

Links to articles:

WSJ.com: http://online.wsj.com/article/SB10001424127887324900204578285582125381660.html

NY Times DealBook: http://dealbook.nytimes.com/2013/02/05/dell-sets-23-8-billion-deal-to-go-private/

Bloomberg: http://www.bloomberg.com/news/2013-02-05/dell-taken-private-as-pc-market-slump-hastens-24-billion-buyout.html