Private Equity & VC

What you'll learn

• ✓Describe LBOs
• ✓Explain VC fund structure

Lessons

1. 🏗️
   Two Stories, Same Label

   Toys R Us 2017 and a quiet AI bet, both called 'private'
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2. Venture Capital

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3. Leveraged Buyouts

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4. Inside a PE or VC Fund

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5. The J-Curve and the New Wrinkles

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6. Does Any of This Beat the Index?

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Sources

All content is drawn from the sources below. We deliberately avoid unverified material.

• Barbarians at the Gate: The Fall of RJR Nabisco
  Bryan Burrough and John Helyar, Harper & Row, 1990 · book
  Canonical narrative of KKR's ~25 billion 1988-89 RJR Nabisco LBO, used in lesson 3.
• The Money of Invention: How Venture Capital Creates New Wealth
  Paul A. Gompers and Josh Lerner, Harvard Business School Press, 2001 · book
  Foundational reference for VC fund structure, power-law return profile, and the follow-on-into-winners pattern, used in lessons 2 and 6.
• Leveraged Buyouts and Private Equity
  Steven N. Kaplan and Per Stromberg, Journal of Economic Perspectives, Winter 2009 (vol. 23, no. 1) · academic
  Authoritative survey of LBO mechanics, fund structure (2 and 20, hurdle, GP commit), and stable-cash-flow target preferences, used in lessons 3 and 4.
  https://www.aeaweb.org/articles?id=10.1257/jep.23.1.121
• Private Equity Performance: What Do We Know?
  Robert S. Harris, Tim Jenkinson, and Steven N. Kaplan, Journal of Finance, October 2014 (vol. 69, no. 5) · academic
  Source for 'median PE roughly matches public equity, top quartile beats, bottom quartile trails' finding used in lesson 6.
  https://onlinelibrary.wiley.com/doi/10.1111/jofi.12154
• Private Investments Benchmarks (PE and VC)
  Cambridge Associates · data
  Long-running benchmark dataset for net-of-fee PE and VC returns by vintage year, used in lesson 6 for the dispersion findings.
  https://www.cambridgeassociates.com/benchmarks/
• Burgiss Private Capital data (now MSCI Private Capital Solutions)
  Burgiss / MSCI · data
  Cash-flow-based PE and VC performance database, used in lesson 6 alongside Cambridge Associates for performance dispersion claims.
  https://www.msci.com/our-solutions/private-capital
• Toys 'R' Us Files for Bankruptcy, Crippled by Competition and Debt
  Michael Corkery, The New York Times, September 19, 2017 · article
  Reporting on the September 18, 2017 Chapter 11 filing and the role of LBO debt service, used in lesson 1.
  https://www.nytimes.com/2017/09/19/business/dealbook/toys-r-us-bankruptcy.html
• Toys 'R' Us go-private transaction, July 2005 (announcement and closing)
  Bain Capital / KKR / Vornado press releases and SEC filings (Schedule 14D-9 and related) · institutional
  Primary filings for the ~6.6 billion 2005 take-private and ~5.3 billion debt component, used in lesson 1.
  https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000051434&type=SC+14D9&dateb=&owner=include&count=40
• Welcome To The Unicorn Club: Learning From Billion-Dollar Startups
  Aileen Lee, TechCrunch, November 2, 2013 · article
  Origin of the 'unicorn' term used in lesson 2.
  https://techcrunch.com/2013/11/02/welcome-to-the-unicorn-club/
• Sequoia Capital, Don Valentine, and the Apple Computer investment (1978)
  Spencer E. Ante, 'Creative Capital: Georges Doriot and the Birth of Venture Capital', Harvard Business Press, 2008, plus Sequoia partner interviews · book
  Primary historical reference for the Sequoia-Apple 1978 investment used as the VC anchor case in lesson 2.
• SEC Form ADV filings (private fund advisers)
  US Securities and Exchange Commission, Investment Adviser Public Disclosure · institutional
  Public disclosure of registered private-fund advisers, including AUM, fees, and conflicts; relevant to fee transparency claims in lessons 4 and 6.
  https://adviserinfo.sec.gov/
• Private Fund Advisers Final Rule (release IA-6383)
  US Securities and Exchange Commission, August 23, 2023 · institutional
  SEC rulemaking on private-fund disclosure, relevant to the 2020s-wrinkle and fee transparency discussion in lessons 5 and 6.
  https://www.sec.gov/rules/2023/08/private-fund-advisers-documentation-registered-investment-adviser-compliance