I have been involved in the venture capital industry for over 25 years, and it is the extremely rare case that managers of venture capital funds have been accused of fraud.  I'm of the view that the vast majority of venture capital fund managers are honorable people with strong sense of values and integrity, and it disappoints me when fraud is alleged.  However, when cases of fraud are alleged, it serves as a poignant reminder for venture capital fund investors to conduct thorough due diligence on fund managers before investing and to be vigilant after investing to identify any potential fraud.

Reuters recently reported in "Venture Capitalists Sues Former Boss, Now Fired, For Fraud" that G. Steven Burrill, founder of life science venture capital firm Burrill & Co. (the website was down at the time of this writing, but the link is www.burrillandco.com) has been fired from the firm he founded and sued for fraud.  If the allegations are proved true, this would mark a sad chapter in the career of this longtime biotech investor, and a sad moment for the venture capital industry.

I have seen the rare case of scandal or alleged misconduct among venture capital fund managers (primarily related to sex or drugs), and allegations of fraud are no less rare.  The following are a few of the reported fraud cases alleged against venture capital fund managers:

• Earlier this year the SEC charged a venture capital fund manager with fraud by using fund assets to pay a fake front company controlled by the manager.
• In 2011, the SEC alleged that a venture capital fund manager committed fraud in connection with a fund he promoted.
• In 2009, the SEC filed a complaint alleging that a venture capital fund manager committed fraud in connection with raising a fund and operating as an unregistered broker-dealer.
• In 2008, the SEC alleged that a former venture capitalists defrauded investors and using the money to buy a stake in a professional hockey team.
• In 2008, a venture capital fund manager was convicted of defrauding investors of more than $20 million in connection with raising a fund and financing for a company.
• In 2005, an accountant associated with a venture capital fund pled guilty to fraud in connection with the diversion of capital from a venture capital fund.

Unfortunately, fraud does occur, and the foregoing examples are again a reminder to be diligent and vigilant when investing in venture capital funds.

If you are aware of any other allegations of fraud or wrongdoing by venture capital fund managers, please let me know.

Link to Reuters story:  http://www.reuters.com/article/2014/06/20/us-venture-fraud-burrill-idUSKBN0EV01720140620

There's an interesting, although a bit technical, article in the NY Times DealBook by Victor Fleischer that discusses how the Obama administration could, by executive action, change the tax treatment of carried interest from capital gains to ordinary income.  This is a hot topic for any private equity or venture capital fund manager that has carried interest, as it could almost double the tax burden on carried interest, or carry as it is known in the industry.  The article is "How Obama Can Increase Taxes on Carried Interest" and the link is here: http://dealbook.nytimes.com/2014/06/12/how-the-president-can-increase-taxes-on-carried-interest/

Uber has raised $1.2 billion at an $18.2 billion post-money valuation - see Uber's blog post here.  The investors in this round must believe that Uber is worth this valuation, or else why would they have invested?  Investors at the $18.2 billion valuation include Fidelity Investments as lead investor, BlackRock, venture capital firm Kleiner Perkins Caufield & Byers and Google Ventures.  These are smart, sophisticated, successful investors.  But $18.2 billion?  Some are skeptical.

In the WSJ post "Uber's $18.2B Valuation Is a Head Scratcher" author Christopher Mims discusses how the "moat around Uber's services is incredibly shallow" and discusses how competition, a "frictionless market" and Uber's lack of owning its ecosystem present issues for the valuation.  At the end of the article, which is worth a read, Mr. Mims takes a look at Uber's valuation and says that even if Uber captures 50% of the world taxi market in 5 years, the company would still be less than $18.2 billion.  Here's the link to the article:  http://blogs.wsj.com/digits/2014/06/06/commentary-ubers-18-2b-valuation-is-a-head-scratcher/

The Huffington Post article "Uber Worth $18 Billion Because Sure, Why Not?" written by Mark Gongloff skeptically compares the valuation of Uber to that of other companies, and states that at $18 billion, Uber is worth more than half the companies comprising the S&P 500 index, more than all of the personal real estate in Falls Church, Virginia, more than Alcoa, Clorox, Chipotle or Whole Foods.  Here's the link: http://www.huffingtonpost.com/2014/06/06/uber-18-billion_n_5460748.html

Finally, in the San Jose Mercury News article "Uber valued at a whopping $18.2 billion,"  author Heather Somerville notes that Uber is now the most-highly valued private US venture-backed company (ahead of Airbnb and Dropbox at $10 billion, Palantir at $9 billion and Pnterest at $5 billion) and worth more than rental car companies Hertz (market cap of roughly $12 billion) and Avis ($6 billion).  The article also explores some of the issues confronting Uber, including regulatory and legal issues.  Here's the link: 
http://www.mercurynews.com/business/ci_25913159/18-2-billion-valuation-makes-uber-top-venture

To me, whether this valuation is correct or not (and only time will tell), it is another example of how frothy the market is for venture capital-backed technology companies in the "sharing economy" sector.