TOP VIEW Two dismal years for the private equity industry have revealed the risks lurking behind the formerly outsized returns. Those of us who became embroiled in the technology boom’s euphoria are now struggling to manage underperforming private equity investments. As the market begins to show renewed signs of life, we need to work toward a consensus with the industry over issues such as the appropriate content, detail and frequency of performance and risk-information disclosures.

…Twice Shy
Many of us turned to angel investing for the first time in the boom years of the late 1990s, when levitating equity markets whetted our appetites for risk. Angels invest directly in very young, private companies by themselves or with a small group of fellow angels. Angel clubs are organized in various ways: Some pool their money and make investment decisions together, almost like a small fund. Others simply provide a forum where companies can pitch themselves, and individuals decide whether to invest and whether they want to join in with other members to share the risk. Regardless of the shape they take, these informal private equity groups are facing several of the same issues that confront the venture capital firms.

The last two years have brought many angels down to Earth. John May, managing partner of New Vantage Group, which manages a handful of more formal angel funds in the Washington, D.C., area, has been involved in the venture and angel communities in the Mid-Atlantic region for years. He headed recently to a meeting of the Washington Dinner Club, one of the groups New Vantage manages. The club has a limited amount of money set aside for “follow-on” investments, he says. “So the point of the meeting was to go over our portfolio and make some tough choices about which companies we would keep alive and which ones we’d have to walk away from.”