Venture Capital Performance Continues To Improve In First Quarter Of 2013
ARLINGTON, Va., July 30, 2013-- Venture capital performance improved across most time horizons as of March 31, 2013, according to the Cambridge Associates LLC U.S. Venture Capital Index®, the performance benchmark of the National Venture Capital Association (NVCA). Higher returns were seen in the quarterly, 3-, 5-, 10- and 20-year horizons with declines in the 1- and 15-year periods. The 10-year performance continued its steady upward climb for the 12th straight quarter. The venture capital index outperformed the DJIA, NASDAQ Composite and S&P 500 across the 15- and 20- year time horizons, falling short of these public indices in all other time periods.
“The surge of the public markets in the first quarter of this year was very difficult to compete with from a returns perspective, yet there is clearly a silver lining if these indices remain strong,” said Mark Heesen, president of NVCA. “Venture-backed companies that have been waiting for the right time to go public or an attractive acquisition price will be able to move forward in a favorable manner which will improve valuations across the board. All of these factors will drive improved performance over the remainder of 2013.”
“LPs received more distributions from VC funds than they paid into funds during the quarter, continuing a most welcomed trend. Nevertheless, political headwinds weighed heavily on the exit environment for VC funds, as the number of M&A exits and IPOs were seasonably low,” said Theresa Sorrentino Hajer, managing director and venture capital research consultant at Cambridge Associates. “While confidential registration make it harder to evaluate the backlog of VC-backed companies waiting to go public, it seems likely that the continued strength in the public markets should push many successful companies, which up until now have chosen to stay private, to actively seek an exit.”
Vintage Year Return Ratios
The chart on the next page lists the ratio between the dollars paid into venture capital funds by limited partners (LPs) and the dollars distributed to them by vintage year. For example, the 2001 vintage year funds have distributed cash of 0.72 times the amount of capital paid in by LPs and the residual value is 0.40 times the paid-in capital; the total value multiple is therefore 1.12 times. It is important to note that the residual value is unrealized and will change as companies exit the portfolio, are re-valued, or are written off.
The 2004 vintage year funds continue to have the most positive ratio of the last decade, returning 1.44 times the capital contributed by LPs, should those funds realize the value of what remains in the portfolio. More recent vintage years have yet to return significant cash to LPs as most funds do not have the opportunity to begin returning capital until after year five.
Additional Performance Benchmarks
To view the full, comprehensive report, which includes tables on additional time horizons, vintage years, and industry returns, please visit the Cambridge Associates or NVCA websites.
Cambridge Associates derives its U.S. venture capital benchmarks from the financial information contained in its proprietary database of venture capital funds. As of March 31, 2013, the database included 1,428 venture funds formed from 1981 through 2013.
About The National Venture Capital Association
Venture capitalists are committed to funding America’s most innovative entrepreneurs, working closely with them to transform breakthrough ideas into emerging growth companies that drive U.S. job creation and economic growth. As the voice of the U.S. venture capital community, the National Venture Capital Association (NVCA) empowers its members and the entrepreneurs they fund by advocating for policies that encourage innovation and reward long-term investment. As the venture community’s preeminent trade association, NVCA serves as the definitive resource for venture capital data and unites nearly 400 members through a full range of professional services. For more information about the NVCA, please visit http://www.nvca.org.
About Cambridge Associates
Founded in 1973, Cambridge Associates is a provider of independent investment advice and research to institutional investors and private clients worldwide. Today the firm serves over 950 global investors and delivers a range of services, including investment consulting, outsourced portfolio solutions, research services and tools (Research Navigatorsm and Benchmark Calculator), and performance monitoring, across all asset classes. The firm compiles the performance results for over 5,300 private partnerships and their more than 67,000 portfolio company investments to publish its proprietary private investments benchmarks, of which the Cambridge Associates LLC U.S. Venture Capital Index® and Cambridge Associates LLC U.S. Private Equity Index® are widely considered to be among the standard benchmark statistics for these asset classes. Cambridge Associates has been selected to provide data and to develop and maintain customized industry benchmarks for a number of prominent industry associations, including the Institutional Limited Partners Association (ILPA), Australian Private Equity & Venture Capital Association Limited (AVCAL); the African Venture Capital Association (AVCA); the Hong Kong Venture Capital and Private Equity Association (HKVCA); the Indian Private Equity and Venture Capital Association (IVCA); the New Zealand Private Equity & Venture Capital Association Inc. (NZVCA); the Asia Pacific Real Estate Association (APREA); and the National Venture Capital Association (NVCA). Cambridge also provides data and analysis to the Emerging Markets Private Equity Association (EMPEA). Cambridge Associates has more than 1,100 employees serving its client base globally and maintains offices in Arlington, VA; Boston; Dallas; Menlo Park, CA; London; Singapore; Sydney; and Beijing. Cambridge Associates consists of five global investment consulting affiliates that are all under common ownership and control. For more information about Cambridge Associates, please visit http://www.cambridgeassociates.com.
Downloadable Venture Capital Database