How We Got Started

I don't know about you but I enjoy reading about the founders of cool companies. I think that VR is a cool company so I am hoping that some of you might be interested in how we started it. VR really started up at the Harvard Business School in 2004. There were several of us who had entrepreneurial backgrounds who really wanted to work in VC, but the chances of getting a job in VC were kind of similar to the chances of the Boston Red Sox winning the world series before the curse was lifted (and it was lifted as the Yankees will see in the post-season). We applied for positions but none of us got jobs. So we opted to do what we had always enjoyed--start a company. One of the companies we started was originally called Venture Engine. The idea behind Venture Engine was to turn the tables on venture capitalists a little--not in any kind of particularly spiteful way--by allowing the entrepreneurs who worked with them to confidentially rate their experiences working with the VC. The idea actually camewhile some of us were watching a Red Sox game in The Grille restaurant. We were thinking about the book Moneyball and about how much data we gather on professional baseball players. It led us to think about how much data professional public equity investors gather about publicly traded companies and how little data is available about private companies and their investors. We kind of thought that the private equity industry would follow the path of most other cottage industries. It would start out as small and clubby with very little information available to outsiders, kind of like the early days of real estate investing. Then just like real estate investing, information providers would crop up and start providing more information about the industry, about its investors, and about deals. Think about MLS for example, or its web 2.0 peer Zillow.

Anyway, we envisioned selling entrpeneur's ratings of VCs to the VCs themselves and to the large institutional investors who invest in VCs. We launched the company in earnest in Q3 2004 and started gathering data from entrepreneurs in 2005. We ultimately changed our name to Venture Returns. While entrepreneur ratings were the genesis of the idea, we never really wanted this to become the centerpiece of what we were trying to do. We always dreamed much bigger and as you can see on our current site, www.venturereturns.com, we view this as only one of many services we offer to our user community.

I don't want to talk too much about our grand vision because there are some competitors out there, but let met just say we are excited about what we think we can offer our core community of entrepreneurs and the VCs and private equity professionals who invest in them.

One of the tools that we have launched is a valuation tool for private companies. We recognize that valuation is a very tricky art and science. Some of us, myself included, have actually spent years doing these kind of valuations. We didn't build this tool as a professional, perfect way to create a valuation of a private company. Rather, we think of ourselves more like Zillow.com, in the sense that this is a first-pass rough estimate of the value of your company. As we gather more data and as we refine our model we think that it will become quite accurate. Also, the tool allows deal professionals (private equity gals and guys, VCs, and investment banking pros for starters) to find comparables in a much quicker and efficient way than they have historically. Selecting the right set of comparables in valuation work is always tricky. We have created a tool that should make this dramatically easier. While we may not be able to take the art out of selecting the right comps, we can assure you that our comp data is solid. We get our public comp data directly from stock exchange feeds and we update these feeds every day. Further, we gather and quality check our own M&A data. Right now the tool works only for technology companies but we are in the process of expanding it to all companies.

Here is a picture of a quick valuation that I did for a friend of mine who has a security software company that is growing nicely and has significant trailing revenues and that recently hit profitability. WARNING: the picture looks awful unless you click on the little expand button down at the bottom of the page. Sorry I need to convert this to a .jpeg and re-upload sometime later.