#Pensions win with #Twitter

by Michael Roth

From the Research Desk…

With all the buzz about TWTR this past week, we decided to look through our database to see who has and will benefit from VC firms’ investments in Twitter. We have examined which pension funds were invested in the funds that were actively investing during the period when the GPs invested in Twitter.

The big winners appear to be Mass PRIM, Oregon PERF, and Los Angeles County ERA. They took a chance and invested in Fred Wilson and Brad Burnam’s first fund, Union Square Ventures 2004. As of Q1 2013, this fund has been a monster performer, returning more than 10x invested capital and a 67% net IRR according to Oregon PERF. In addition to Twitter, USV’s 2004 fund also made lucrative investments in Zynga and Tumblr and is still invested in Disqus and Etsy.

Meanwhile, the other Series A investor, Charles River Ventures, does not appear to have any public pension LPs in their 2007 vintage fund, Charles River Partnership XIII (talk about lucky #13!).

Los Angeles City ERS (“LACERS”) must be happy to be loyal backers of Spark Capital since they were founded by investment pros from Battery Ventures and Charles River Ventures in 2005. LACERS invested between $9 million and $10 million in each of the first three funds, including Spark Capital II which was actively investing at the time that they invested in Twitter’s Series B. According to LACERS reporting, Spark Capital II has a 50.3% net IRR as of Q4 2012. Returns like this must be why Spark has been able to raise four funds since 2005.

New backers in the Series C round included Institutional Venture Partners (“IVP”). CalSTRS, San Francisco City & County ERS and Indiana PRS are happy they are invested in IVP XII. As of Q2 2013, the later stage investor’s 12th fund has generated a 2.0x net multiple and a 25.4% net IRR according to Indiana PRS.

Insight Venture Partners joined the party a few months later when Twitter raised their next round of capital. Insight’s Fund VI has some familiar LPs, Mass PRIM and Indiana PRS. CalPERS and UC Regents were also invested in the late-stage firm’s sixth fund. As of Q2 2013, the fund has generated a 1.8x net multiple and a 17.9% net IRR according to Indiana PRS.

Of the 150+ pension funds for which we have data, only nine have exposure to Twitter’s growth in value over the last six years. Twitter’s IPO, though one of the largest VC-backed IPOs besides FB, is just another in the line of successful VC-backed IPOs over the last two to three years. Looking at the 2007 vintage, which is six years old and starting to show maturity, the median net multiple of 1.31x is mediocre for VC but it is the highest since 1997 when the median VC multiple was north of 2x. It will be interesting to observe whether LPs show a renewed interest in the venture capital industry given this recent resurgence or are they weary this may be just another bubble.