VentureBeat

Venture capital returns have yet to feel the full impact of the capital markets crisis. Payoffs, as measured by the private equity performance index (PEPI), dipped over the first two fiscal quarters, but were still higher than those out of the NASDAQ and S&P 500, according to a new report released by the National Venture Capital Association and Thomson Reuters.

Second quarter saw an 8.2-point decrease in one-year returns, which fell from 13.3 percent to 5.1 percent on the PEPI, and a 1-point drop in three-year returns. But this still leaves VCs in the black as the markets plunge even lower. After first quarter, PEPI posted a 5.5 percent one-year loss for the NASDAQ, which sunk to an 11.1 percent loss over Q2. The S&P 500 fell 7.4 points to reach a miserable 13.8 percent loss in the same period. PEPI (which monitors the cash flow for more than 1,941 VC and private equity firms, amounting to $828 billion in capitalization), showed that venture capital retains this edge over 10 and 20-year periods. For the latter, the report shows a 16.9 percent return for VCs, compared to NASDAQ’s 9.2 percent and the S&P’s 8 percent returns.

When PEPI reported its Q1 numbers in July, VCs appeared resilient as the economy began to decline. Of course, the worst was yet to come, and these new figures — while still promising — suggest that firms may not be as teflon as previously thought. The report attributes the second quarter drop to the closed IPO window, which forced VCs to pump more money into later-stage companies left to tread water until it reopens. The situation hasn’t improved since, and NVCA president Mark Heesen predicts that PEPI data will dive even further in future quarters.

Blackberry Partners Fund has awarded $150,000 prizes to three makers of applications designed to work on the BlackBerry handheld.

And the winners are:

• Multiplied Media’s Poynt search service, which uses GPS to connect users with local businesses
• Strands’ Social Player, a social-networking music player that connects users and recommends songs based on their tastes, soon to be released
• Nobex Technologies’ Radio Companion, an app that tells users what’s playing on 2,700 radio stations and gives them the ability to buy the songs.

The companies couldn’t be more different in scale. Multiplied Media is a publicly traded company in Canada, venture-backed Strands has received $55 million from BBVA, Dalbergia, Sequel R&D and Debaeque Venture Capital, and Santa Cruz, Calif.-based Nobex is a newcomer (this $150K is its first financing).

The Blackberry Developers Challenge is part of the fund’s Jump Start Financing Initiative. The fund itself is new, having launched in May with support from RBC Venture Partners (a branch of the Royal Bank of Canada), Thomson Reuters, JLA Ventures and BlackBerry maker RIM. Its goal is to speed app development to keep pace with the iPhone and Google’s Android.

Until about a year ago, you were in an unenviable position if you wanted to build a web site that used or created semantic data: You pretty much had to build all your tools from scratch. Calais, a semantic web service being developed by information giant Thomson Reuters, is offering to help change that with a service it’s rolling out today.

The “semantic web” is a general term for the part of the Internet’s data that machines can understand and interpret. For example, if you for some reason wrote “wrench in the library”, a semantic application might be able to automatically link it to Colonel Mustard, or a history of wrenches, depending on the context.

Calais is a set of tools for creating and using that data. It lets you build services in areas like news, travel or advertising with its generalized platform — what its de facto CEO within Thomson Reuters, Thomas Tague, calls the “plumbing” of the semantic web.

Calais has been open since January, when it invited developers to come in and try it free of charge. Some first efforts have emerged since then using it, like Gnosis, a Firefox plugin that helps research data points like companies or people as you browse the web, and LinkedFacts, a demonstration of how semantic technology can enhance news browsing, but those developers built without any real guarantee that the service would be maintained by Thomson Reuters.

Today, Calais is providing some much-needed guarantees. While a free version, OpenCalais, will be kept for developers, companies and publishers will have access to subscription-based professional and enterprise versions. They’ll get enough processing power for millions of daily data “transactions,” as well as service and support. Most important, they’ll sign annual contracts that require Thomson Reuters to keep it running.

Those packages should give existing companies a green light to put serious resources into development atop Calais. Tague told me at a recent San Francisco meeting that the guarantees are timely — in the eight months Calais has been around, he said, adoption has moved from geeks who just wanted to play with the tools, to small publishers and startups, to large companies.

As to what will come out of Calais, it’s hard to say. One somewhat frustrating point when talking about any generalized semantic web platform is that it’s early days, and developers are still figuring out what they can do with the tools. There are some early ventures. One is Twine, which helps its users collect and organize large volumes of information, for easier search and discovery. There’s also Peer39, which provides contextual targeting for advertising, and TripIt, which automatically organizes your travel itinerary. Others, from BlueOrganizer to Zemanta, are popping up every month.

For Tague, the best semantic web apps have yet to be dreamed up by their creators. Some of the juiciest opportunities are around news, where publishers will soon be able to automatically create news subject hubs and link paths to more information with Calais; an early Reuters project called Gist does some of that. But other ideas may prove even better.

For the geeks among you, here’s a short list of some other tools that the Calais team is working on: First, it just released a tool to automatically generate semantic metadata for any existing page on the web. It’s also working on de-referenceable URIs, which helps define the characteristics of a resource located at a web address. And finally,  it’s putting the finishing touches on its ontology, for public release later this year.

With the economic downturn, it’s no surprise that venture capital returns, as measured by the private equity performance index (PEPI), have been falling. But a new report notes that VCs are still doing okay compared to stock indexes like the NASDAQ and the S&P 500.

During the first quarter of this year, PEPI’s one-year returns fell 7.6 percent compared to Q4 2007, according to the report from Thomson Reuters and the National Venture Capital Association. They’re also down 2.5 percent compared to the same period last year. But a 13.3 percent return still puts VCs in the black, while NASDAQ showed a 5.5 percent one-year loss, and the S&P 500 showed a 6.6 percent loss. PEPI (which tracks the cash flow of more than 1,860 U.S. venture capital firms, accounting for more than $678 billion in capitalization) shows a similar advantage over a 10-year period, with a 17.2 percent return compared to NASDAQ’s 2.2 percent return and the S&P 500’s 1.8 percent.

So it looks like all those investors who are still putting their money into venture firms know what they’re doing. VCs, after all, invest for the long-term, and are better-equipped to weather cyclical doldrums. (If only it were easier to become a VC, or at least a VC at a reputable firm …) The economy’s biggest effect on the venture market has been indirect — the IPO and mergers/acquisitions markets are hurting, which means VCs have to pump more money into later-stage companies. That’s presumably why returns are already falling. In a statement released with the report, NVCA President Mark Heesen says returns will fall even further if the exit market doesn’t improve.

If you’re wondering why we haven’t been covering much IPO news recently, it’s because there hasn’t been any — there were literally zero venture-backed IPOs in the second quarter of 2008.

This is the first quarter since 1978 that has gone by without a single venture-backed IPO, according to a new report from the National Venture Capital Association and Thomson Reuters. The figures are also down quite a bit from the high times of 2007, including the 25 IPOs during Q2 of that year, and the 31 IPOs in Q4. There were a total of 87 IPOs last year, while 2008 is a wee bit behind, with only five IPOs in its first half.

While “zero IPOs” is the most eye-catching figure, the report also shows a drop in the number of mergers and acquisitions — there were only 50 in Q2 2008, lower than any quarter in 2005, 2006 or 2007. The chart below shows both IPOs and mergers for the past 20 years (the final bar shows only the first half of 2008, of course).

The decline isn’t surprising given the broader economic climate, but when both traditional exit avenues dry up, that’s not just a bad sign for VCs, but for startups in general. Of course, the best startups are the ones that can weather tough times and are ready to come roaring back when the economy picks up again. (Meanwhile, to make it through the drought, some VCs are looking for alternate sources of liquidity.)

At the end of June, the NVCA surveyed its members and found that 81 percent of the 660-plus respondents said they don’t expect the IPO window to open anytime this year. The three leading causes for the drought are, in descending order, skittish investors, the credit crunch/mortgage crisis and the increased costs created by Sarbanes Oxley regulation, according to the survey.

Today’s VentureWire brings news of another company to take a hit from the economic climate — Bayhill Therapeutics, a Palo Alto, Calif.-based maker of autoimmune disease treatments, withdrew its IPO last week.

[Photo from the National Climactic Data Center]