Allen Latta's Thoughts on Private Equity, Etc.
  • Allen's Blog
  • Blog Post Categories
  • Glossary of Private Equity Terms
  • Resources
  • About
  • Contact

Fraud by Venture Capital Fund Managers?

6/21/2014

0 Comments

 
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



0 Comments

How Obama Can Increase Taxes on Carried Interest - NY Times DealBook

6/12/2014

0 Comments

 
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/
0 Comments

Is Uber Worth $18.2 Billion?

6/7/2014

0 Comments

 
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.

0 Comments
    About this Blog

    This Blog is a collection of thoughts on a variety of topics of interest to me, including:
    • Private Equity
    • Buyouts
    • Growth Equity
    • Venture Capital
    • Corporate Finance
    • Investment Banking
    • IPOs
    • M&A
    • Technology
    • Economics
    • Law
    I hope you find this blog of interest.
    View my profile on LinkedIn

    Categories

    All
    Anti-Dilution
    Berlin
    Board Of Directors
    Brazil
    Buyouts
    California
    China
    Cleantech
    Corporate Finance
    Corporate Venture Capital
    Crowdfunding
    Dilution
    Dividend Recap
    Economics
    Emerging Managers
    Endowments
    Entrepreneurship
    Europe
    Fund Terms
    General
    Growth Equity
    Healthcare
    India
    Innovation
    Investment Banking
    Ipo
    Israel
    Law
    Legal
    Libor
    Life Sciences
    Listed Private Equity
    London
    Los Angeles
    LP Corner
    M&A
    Mexico
    New York
    Pensions
    Politics
    Private Equity
    Public Stocks
    San Francisco
    Secondaries
    Secondary Exchanges
    Silicon Valley
    South America
    Speaking
    Stock Market
    Stock Options
    Tax
    Technology
    Travel
    United Kingdom
    Valuation
    Venture Capital
    Venture Capital Deal Terms
    Webinars


    Archives

    October 2021
    August 2021
    July 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    February 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    February 2016
    January 2016
    November 2015
    October 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014
    November 2013
    October 2013
    September 2013
    August 2013
    July 2013
    June 2013
    May 2013
    April 2013
    February 2013
    January 2013
    December 2012
    November 2012
    October 2012
    September 2012
    August 2012
    July 2012
    June 2012
    May 2012
    April 2012
    March 2012
    February 2012
    January 2012
    December 2011
    November 2011
    October 2011


    Copyright Notice:

    ​All original works on this site are 
    © 2011-2020 Allen J. Latta. All rights reserved.  Neither this website nor any portion thereof may be reproduced or used in any manner whatsoever
    without the express prior written permission of Allen J. Latta.

    LP Corner® is a registered trademark of Campton Private Equity Advisors.  Used with permission.

    DISCLAIMER:  Readers of this Blog are not to construe it as investment, legal, accounting or tax advice, and it is not intended to provide the basis for the evaluation of any investment.  Readers should consult with their own investment, legal, accounting, tax and other advisors to the determine the benefits and risks of any investment.

    Private equity investments involve significant risks, including the loss of the entire investment.

    This Blog does not constitute an offer to sell or the solicitation of an offer to buy any security.

Copyright © Allen J. Latta.  All rights reserved.