ff Venture Capital has consistently generated a gross IRR on invested capital in excess of 30%, in a world where the average ten-year returns for venture capital firms are in the single digits. But, historically we couldn’t say that it in a public setting. Now we can.
Software is eating every industry, including the entrepreneurial ecosystem itself. Funding platforms and tools such as AngelList and Indiegogo* are clearly changing how entrepreneurs are raising capital. But what about venture capital firms?
Individual angels and smaller VC funds are the main source of initial capital for entrepreneurs, are armed with the highest returns, and yet, small VC funds spend far too much time raising capital. Bigger, later stage firms can raise money more easily, but these firms end up with far worse returns. After all, 48% of the capital that the VC industry attracted in 2012 went to just 10 large venture firms. That’s hard to believe when no Kauffman Foundation VC fund larger than $1 billion returned more than twice the invested capital after fees.
So, why have smaller VC funds found it so challenging to raise capital? A prime reason is that they are typically too young to have a track record which gives investors comfort. They also usually have minimal infrastructure—typically just some admin support and an outsourced CFO. However, the biggest reason has been, until now, the ban on general solicitation. This hinders VCs from letting anyone know they are raising capital, and sharing their historical performance, infrastructure, and capabilities. Thus, capital has flowed to players with brand, history, and lots of well-known companies on their website, not based on their actual returns. Historically, VCs raising capital weave stories around all aspects of their business except the most important, which is returns!
Someone had to be the first firm to step forward, share performance data, publicly announce that they are open to new investors (albeit accredited investors), and share their story. We are taking that step: We are pleased to announce that ff Venture Capital is the first institutional venture capital firm to embrace the JOBS Act’s lift of the ban on general solicitation and publicly announce that we are currently raising capital for our third fund, ff Rose Venture Capital Fund.
For more on how we’re doing this, see my Partner John Frankel’s blog post, or read some of our coverage in Bloomberg BusinessWeek, The Financial Times, Fortune, CNBC (video), peHUB, TechCrunch, PandoDaily, Reuters’ Venture Capital Journal, and the The Wall Street Journal.
ff Rose will close to new investors before the end of November. So, now, I can legally say that if you are an accredited investor, and are intrigued to find out more, we invite you to contact us via ffvc.com/invest. We are tracking our marketing as part of this experiment, so please note in the contact form how you heard about ffVC.
* Indiegogo is a ffVC portfolio company.
Posted at Forbes.