Fine, We Won't Mess With Texas!

Sarah Lacy

I know, I know the VC world is sick and tired of reading about disclosure, the topic du jour for much of the past two years. Even when it was a legitimate news story, some VCs like NEA's Dick Kramlich decried it as a "tempest in a teapot." By now, most venture capital firms have come to terms with public pension funds and the risk that when they take their money, details of their fund's performance are subject to open records requests. And as a result, many have been turning it down.

But this is a story that entrepreneurs need to keep reading about.

Start here, with Dan Primack's missive about the topic today. It seems Austin Ventures turned down money from several Texas public pension funds-- including UTIMCO, the one who started the whole brou-ha-ha back in 2003. The concern centers around Texas Attorney General Greg Abbott whose office says he's for pension funds not only releasing top line data on how a venture fund performs, but detailed information about the underlying portfolio companies, including revenues, according to the story.

Now, as a reporter, I’d love to find a way to discover how much these hyped companies that tout their 300% year-over-year revenue growth are actually making. Man, would that make my job easier! But there are two things that the attorney general should keep in mind, if he's really serving the public's interest.

One, private companies have a right to be private. Being a start-up is hard enough in an era of too much venture capital and way too many "me too" companies. It's common to be on the brink of insolvency just before they land that first big account. Having all that dirty laundry out in the press certainly isn't going to make it happen any faster. What good entrepreneur who has his choice of venture firms would possibly go with one that's vulnerable to such a leak? If this goes into practice, venture funds who've taken Texas public pension fund money will be doomed to lesser deals that can't get funding elsewhere.

That leads me to point two: Who does this really benefit? The guise has always been that this is in the public's best interest. Yes, I do think venture firms need to be more open and transparent when they are taking government money. Absolutely their top line performance should be open to scrutiny. And for sure we should get to see what kind of management fees they're raking in. But truth be told, all this disclosure has hurt those pensioners more than helped them. They're now locked out of getting gains from the likes of Kleiner, Perkins, Sequoia, and NEA. Unless Texas makes a public about-face soon, expect Lone Star State pension funds to get even lonelier.