Saturday, April 24, 2010

Retro Review: Information Arbitrage (business and investing)


Information Arbitrage A 17-year Wall Street veteran's perspectives on investment, hedge funds, and ways to harness the power of the internet for Institutional Investors.. Publisher: Information Arbitrage. Costs 99 cents a month.

Some text from his latest blog entry:
IA Venture Strategies - Working to Build a Better Venture Mouse-trap
As was ably covered by Dan Primack in PEHub, I am starting a new venture fund. However, as my friends and venture colleagues know, I am extremely down on what the venture industry has become. To be clear, it is less an issue of structure (management + incentive fees in a GP/LP structure) and more an issue of size. It is clear to understand how motivations get skewed when venture firms effectively become asset managers, where the management fees alone are sufficient to make the partners rich and investments must become increasingly large and non-venture like. Growth capital is not venture capital in my parlance. Venture capital means funding "ventures" - taking on early-stage risk - and actively helping companies execute their plans and achieve their potential. I have a theory that the largest a true venture fund can be, which means, having a seed-stage investment charter together with a "life cycle" approach to investing (leaning into winners, deploying larger amounts of capital in Series A and B rounds, if necessary) is around $300 million. But I digress...

I decided to start my fund after determining that many of the deals I was seeing were both strategic and thematic, strategic to my trading company and thematic in that they all had a common thread - helping to manage and extract value from massive, often real-time data sets - "big data" in jargon. Rather than prosecute them as an angel, I felt a fund structure would better enable me to "size up" in particular deals and to cast a wider net across the big data domain. I wanted the fund to be small ($25 million stated goal, but with the ability to go a little higher) and I wanted it to be different than most venture funds I know, who have raised money largely from pension funds and endowments. I really wanted the fund to be an extension of my activities as an angel, where I frequently build syndicates of value-added angels and select venture firms to help de-risk the portfolio companies and create a network effect across a particular domain.

Talking about the blogs of investors who can start $25 million funds is just a leetle bit outside my area of expertise. All I can say is he certainly sounds like he knows what he’s talking about!

The author, Roger Ehrenberg, updates this blog on an irregular basis. When he’s “on” he does it every four days or so, but sometimes there’s a month in between. It is with this kind of blog that subscribing via the Kindle is most necessary. It only costs 99 cents a month – the cost of a cup of coffee, and when he does make a post you get it immediately without having to constantly check his website. And should he never update it (which I doubt will happen, but of course, anything’s possible) you’re only out $12 for the year. I’d say that’s a better investment risk than many out there!

Reading such a blog gives the average investor an insight into the rarified air of these fund managers, shows how their minds think, and so on. It’s a fascinating read.

No comments:

Post a Comment