InterWest News
Limited Partners Demanding More Face Time With VCs
WSJ Blog: Venture Capital Dispatch
Laura Kreutzer
6 November 2009
[To view photo with Stephen Holmes and Dow Jones Panel, please click here]
When it comes to venture firms communicating with their limited partners in today's uncertain economic times, there is no such thing as too much information. So said general partners and consultants who spoke as panelists during the Dow Jones Limited Partner Summit West this week in San Mateo, Calif.
"The path to riches is a lot less clear than it was," said Stephen Holmes, general partner at InterWest Partners. "With increased fear, people want to know where are we now and that requires enhanced communications."
General partners across the board find themselves stepping up their communi-cations with limited partners as well as the frequency of face-to-face meetings.
"I know who we haven't [visited] in four months [or] six months," said Jennifer James, director of marketing and communications at San Francisco-based Alta Partners. "We're really getting out there and talking to people about the portfolio. Never before have our LPs been more interested in talking to us than they are now."
Investors also want a greater degree of data on portfolio companies than they typically have received in the past, including metrics around cash flows, revenue and leverage, according to Craig Mitchell, director of LP Capital Advisors, a Sacramento, Calif.-based private equity consultant.
"LPs get a lot of information and not a lot of data," said Mitchell. "We have sophisticated LPs out there that do a lot of their own analysis. [Often], what you get is a brochure that feels more spoon-fed. That is probably a lot different from what [GPs] dish out at the investment committee meeting."
LP Capital Advisors tracks more than 10,000 portfolio companies in its database and solicits raw data on the companies from its general partners so it can run analyses for its clients.
"It's important to realize that most LPs don't view their portfolio as a portfolio of funds or fund managers, they view it as a portfolio of investments," said Mitchell. "We spend a lot of time figuring out [what] is their exposure [to certain sectors or strategies]. During the banking crisis, we spent a lot of time helping clients figuring out what their exposure was to banking."
The panelists added that LPs also have to do their share to let their GPs know where there is room for improvement.
"If you're harboring some concerns and not telling me about it it's hard for me to address it," said Holmes. "Short of my being able to cut checks and give back distributions, I'd like to be able to address as many of my LP concerns as possible.
