Subject: RE: WSJ: Hedge Funds Add to Venture-Capital Bounty
From: "Neil Callahan" <[email-masked]>
To: "Dan McHale" <[email-masked]>, "Devon Archer" <[email-masked]>, "John DeLoche" <[email-masked]>, "Hunter Biden" <[email-masked]>, "Eric Schwerin" <[email-masked]>
Date: Thu, 23 Oct 2014 00:22:31 -0400

Wow, shows that some LPs are completely retarded as VC investing and Hedge
Fund investing share absolutely no skills sets or investing properties
whatsoever.  God help us all.

Neil Callahan

Co-Founder & Managing Director

Rosemont Seneca Technology Partners

152 West 57th Street, 47th Floor

New York, New York 10019

202-333-1880 (o)

917-945-9516 (m)

877-749-8879 (f)

www.rstp.com

*From:* Dan McHale [mailto:[email-masked]]
*Sent:* Wednesday, October 22, 2014 10:16 PM
*To:* Devon Archer; John DeLoche; [email-masked]; Eric Schwerin;
Neil Callahan
*Subject:* Fwd: WSJ: Hedge Funds Add to Venture-Capital Bounty

FYI

Sent from my iPad

Begin forwarded message:

*From:* Juliet Chung <[email-masked]>
*Date:* October 22, 2014 at 9:42:29 PM EDT
*To:* "Chung, Juliet" <[email-masked]>
*Subject:* *WSJ: Hedge Funds Add to Venture-Capital Bounty*

Hi, Juliet with the Journal here. Thought you might be interested in this
<http://online.wsj.com/articles/hedge-funds-add-to-venture-capital-bounty-1414021436?mod=WSJ_hp_LEFTWhatsNewsCollection>
story in tomorrow's paper about Maverick Capital launching its first
venture-capital fund Jan. 1--a move highlighting the industry's westward
gaze. As always, please let me know if you'd like to stop receiving these
emails. Best, Juliet

Hedge Funds Add to Venture-Capital Bounty; Maverick Capital Plans to Start
VC Fund On Jan. 1

By Juliet Chung

Wall Street is hitting the startup scene.

Maverick Capital Ltd., one of the oldest hedge-fund firms, plans to launch
its first venture-capital fund on Jan. 1, according to investors, with
hopes of raising $400 million to take stakes in young companies.

In pitching the fund at Maverick’s annual investor meeting last week, one
investor said, founder Lee Ainslie III said the New York firm was seeing
the best opportunities in many years for making early-stage investments in
private companies.

Such deals aren’t the bread and butter of hedge funds, which typically bet
on the moves of stocks and other publicly traded assets.

But Maverick, with roughly $9 billion under management, is among a growing
number of Wall Street firms that are trying to get a piece of the lofty
valuations being achieved by startups in Silicon Valley and elsewhere.

New York investment firms Tiger Global Management LLC and Coatue Management
LLC have been players on the West Coast venture-capital market. Tiger
Global, which started as a hedge fund, now manages more money in its
venture funds than in its hedge funds, according to a person familiar with
the firm. Hedge-fund firm Valiant Capital Management LP, out of San
Francisco, has also been active.

Like those firms, Maverick has roots that trace back to legendary investor
Julian Robertson.

Several mutual-fund firms, including Fidelity Investments and BlackRock
<http://quotes.wsj.com/BLK>Inc., have also taken stakes in a number of
startups.

Venture funds have raised billions of dollars as low interest rates and
stellar returns on some deals—like the public offerings of Facebook Inc.
and Twitter Inc.—have enticed big investors such as pension funds and
endowments to write checks.

Venture funds are on pace to raise the most money in a year since 2007,
according to Dow Jones LP Source.

The new fund won’t be Maverick’s first go-round at investing in young,
closely held companies. The firm has made such investments within its
flagship equities hedge fund since 2004 under David Singer, a managing
director.

Some of its deals have included stakes in IEX Group Inc., the upstart stock
exchange, and a holding company that recently bought Perzo Inc., a Palo
Alto, Calif., messaging-software company.

Its realized, private investments since 2004 have compounded at 25.9%; of
the 49 private investments it has made since then, it has written off six,
according to a person familiar with the matter.

In its new fund, Maverick plans to invest in health-care, consumer and
software companies, both in Silicon Valley and beyond.

The new fund is considered sizable for venture capital but still
considerably smaller than the $1.5 billion funds raised earlier this year
by Tiger Global and Andreessen Horowitz.

The enthusiasm for venture investments, and free-spending by some startups
flush with cash as a result, has caused some industry veterans to wonder
lately if the market is frothy.

Prominent venture capitalists Bill Gurley and Marc Andreessen have sounded
notes of caution recently, and Mr. Andreessen tweeted that his firm had
pulled away from growth-stage investing, largely because hedge funds and
other public-market investors have been pumping up valuations by crowding
into deals.

A similar dynamic played out in the dot-com boom, when money managers
flocked to venture-capital investing after years of eye-popping valuations.
Many of those managers got in just before the Internet bubble burst.

David York, managing director of the San Francisco-based Top Tier Capital
Partners LLC, which invests client money in venture funds, sounded a
similar worry.

“We are far more cautious today than we were two years ago because of the
money flowing into the late-stage space both from hedge funds as well as
from mutual-fund companies,” he said in an interview.

Top Tier believes the technology cycle still has “room to grow,” Mr. York
said, “but it does make us take pause.”

Mr. Ainslie, 50 years old, started Maverick in the early 1990s with
financial backing from the Wyly family out of Texas. Mr. Ainslie later
bought them out.

Maverick’s venture-capital fund will be led by the San Francisco-based Mr.
Singer, and the firm will put $50 million of its own money into the fund.

It will avoid pre-initial-public-offering investing, when valuations are
typically higher, and instead focus on investing when companies are valued
in the tens to hundreds of millions of dollars, said a person familiar with
the matter. The person added that the firm shares the concerns about some
recent valuations.

In its hedge-fund business, Maverick’s average annualized return has been
about 12% since its 1995 inception, compared with 9.4% for the S&P
500-stock index.

This month, when many top hedge funds got dinged by market fluctuations,
Maverick was in the black.

In its second-quarter investor letter, Maverick said it was taking a
conservative posture in its portfolio and bringing down its exposure to the
stock markets. The firm saw fewer compelling long ideas than it usually
did, the letter said, according to a person who read it, and was worried
about the complacency of the markets given challenges in Europe and China.

The firm, which bets on and against stocks, was up 0.7% through Friday for
October and 3.4% for the year, compared with 3.7% on a total-return basis
for the year by the S&P 500-stock index. Maverick Select, a fund which
invests in Maverick’s best long and short ideas, is up 10.3% for the year.

At the annual meeting, Mr. Ainslie said he expects the stock-picking
environment to improve as the Federal Reserve continues to pull back on its
bond-buying program.

—Douglas MacMillan contributed to this article.

*Write to *Juliet Chung at [email-masked]