SOURCE: National Venture Capital Association

National Venture Capital Association

National Venture Capital Association

November 01, 2010 09:00 ET

Venture Capital Returns Decline Moderately in the First Half of 2010

ARLINGTON, VA--(Marketwire - November 1, 2010) - With the exception of the 20-year return which increased modestly, venture capital performance declined across most time horizons as of the end of the second quarter of 2010, according to the Cambridge Associates U.S. Venture Capital Index®, the performance benchmark of the National Venture Capital Association. While the deterioration was mild, it reflected ongoing challenges in today's venture-backed exit market which continued to struggle to recover from the financial crisis of 2008. Still venture capital performance surpassed the public market indices for the quarter, 3, 5, 15 and 20-year time horizons. 

US Venture Capital Index Returns for the Periods ending
6/30/2010, 3/31/2010 and 6/31/2009

For the period ending   Qtr.   1
  June 30, 2010   0.4   6.4   -2.7   4.3   -4.2   38.1   24.3
  March 31, 2010   0.7   6.5   -0.7   4.9   -3.7   38.2   24.0
  June 30, 2009   0.2   -17.1   1.3   5.7   14.3   36.3   22.7
  Other indices at June 30, 2010
  DJIA   -9.6   18.9   -7.4   1.7   1.7   7.5   8.9
  NASDAQ Composite   -12.0   14.9   -6.8   0.5   -6.1   5.6   7.9
  S&P 500   -11.4   14.4   -9.8   -0.8   -1.6   6.2   7.7

Sources: Cambridge Associates LLC, Dow Jones & Company, Inc., Standard and Poor's, and Thomson Datastream.
Note: Because the U.S. Venture Capital index is capital weighted, the largest vintage years mainly drive the index's performance.

"While we have seen increased exit volumes in 2010, the number of IPOs and acquisitions have not translated to improved venture returns yet," said Mark Heesen, president of the NVCA. "The venture industry will likely see several more quarters of declining performance overall until distributions to limited partners begin to flow more readily in the coming year. Based on the current exit market, the 10-year return number -- which we view as the most reflective of industry performance -- won't begin to reverse its negative trend until mid- 2011."

Said Peter D. Mooradian at Cambridge Associates, "While there has been a welcome increase in IPO activity in 2010, there is still room for improvement. A more robust IPO market will also drive higher M&A transaction values by providing a competing alternative exit route for venture-backed companies. When this occurs, better performance for the asset class will follow."

Vintage Year Return Ratios

The following chart illustrates the relationship between the dollars paid into venture capital funds by limited partners and the dollars distributed back to them by vintage year. The chart also incorporates the residual value of the portfolios at 6/30/10 for an overall ratio. For example, the 2003 vintage year funds have distributed cash of .38 times the amount of capital paid in by LPs. If you account for the current value of the existing portfolio of .73, the ratio increases to 1.11 times. However, it is important to note that the residual value is unrealized and will change as companies exit the portfolio, are revalued, or are written off. 

The 1995 vintage year funds continue to have the most positive ratio, returning 6.14 times the cash contributed by LPs, a number which rises to 6.19 should those funds realize the value of what is currently in the portfolio. More recent vintage years have yet to return significant cash to LPs as most funds do not begin returning capital until after year five.

Vintage Year Multiples Analysis
Pooled Mean Net to Limited Partners
As of June 30, 2010

Vintage Year   Distribution to Paid in Capital (DPI)   Residual Value to Paid in Capital (RVPI)   Total Value to Paid in Capital (TVPI)
1981-1994   3.23   0.01   3.24
1995   6.14   0.05   6.19
1996   4.93   0.09   5.02
1997   2.98   0.07   3.05
1998   1.30   0.15   1.46
1999   0.67   0.24   0.91
2000   0.50   0.41   0.91
2001   0.45   0.57   1.02
2002   0.43   0.54   0.97
2003   0.38   0.73   1.11
2004   0.21   0.89   1.10
2005   0.12   0.87   0.99
2006   0.05   0.91   0.97
2007   0.03   0.95   0.98
2008   0.02   1.00   1.02
2009   0.00   1.01   1.01
Overall   1.09   0.44   1.53

Source: Cambridge Associates

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 June 30, 2010, the database is comprised of 1,294 venture funds formed from 1981 through 2009.

The National Venture Capital Association (NVCA) represents more than 400 venture capital firms in the United States. NVCA's mission is to foster greater understanding of the importance of venture capital to the U.S. economy, and support entrepreneurial activity and innovation. According to a 2009 Global Insight study, venture-backed companies accounted for 12.1 million jobs and $2.9 trillion in revenue in the U.S. in 2008. The NVCA represents the public policy interests of the venture capital community, strives to maintain high professional standards, provides reliable industry data, sponsors professional development, and facilitates interaction among its members. For more information about the NVCA, please visit

Founded in 1973, Cambridge Associates delivers a range of services, including investment consulting, outsourced portfolio solutions, independent research, and performance monitoring and tools across all asset classes, to more than 800 institutional and private clients worldwide. The firm has advised clients on alternative assets since the 1970s and compiles the performance results for more than 2,000 private partnerships to publish the Cambridge Associates U.S. Venture Capital Index® and Cambridge Associates U.S. Private Equity Index®, which are widely considered to be the industry-standard benchmark statistics for those asset classes. In total, the firm has over 950 employees serving its client base globally and maintains offices in Arlington, VA; Boston; Dallas; Menlo Park, CA; London; Singapore, and Sydney, Australia. For more information about Cambridge Associates, please visit

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