Venture Returns Beat the Markets Through Q2—But Got Nowhere to Go But Down

10/27/08Follow @bvbigelow

The National Venture Capital Association usually prefers to track VC performance over a decade-long period, or possibly a five-year span. That’s because measuring performance over a one-year period, say, usually isn’t as useful since investment returns gyrate all over the place in the short term, according to Emily Mendell, the NVCA’s vice president for strategic affairs.

But current economic conditions prompted the Virginia-based association today to include performance results comparing the one-year period that ended June 30 with the one-year period that ended a quarter earlier, on March 31. The results, courtesy of the number crunchers at Thomson Reuters, show an 8.2 percent decrease in investment return, to 5.1 percent.

That still beats the performance of the NASDAQ and S&P 500. But because the economic downturn has basically closed the IPO window for new companies, making it much harder for VCs to cash out, that return-on-investment is expected to decline going forward, Mendell says. It’s also important to note that the latest results lag the markets’ gyrations of the past few months. As NVCA President Mark Heesen put it in a statement: “We have yet to see the full impact of the capital markets crisis in the venture capital performance numbers.”

Below is a table showing venture returns through June 30 over different time periods, and for different stages of investment.

Venture Returns Q2 2008

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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