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Q4 2013 Venture Performance Update

// Wiley Becker - Guest Contributor

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May 14, 2014
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Venture Index Outperforms Major Indices Over 10 Year and Greater Time Horizons
Competitive Public Markets Best Venture in the Short Term
Recent Vintage Average Net IRRs Reach 15% and Upper Quartile Threshold Tops 20%


Cambridge Associates LLC U.S. Venture Capital Index®, the Performance Benchmark of the National Venture Capital Association (NVCA); Average Net IRR and Net Multiple figures are the Arithmetic Mean, hence how the Average can be greater than the Top Quartile; Net Multiple is Total Value to Paid In Capital (TVPI); Vintage year funds formed since 2010 are too young to have produced meaningful returns


The 10 year time horizon of the US Venture Capital Index ® by Cambridge Associates LLC continued its improvement in Q4 2013 to 9.69%, but was bested by the recent strong performance of the three major public indices. While shorter term performance slightly lags the public indices, longer term performance significantly exceeds the public markets. As expected, the Late Stage US Venture Capital Index outperforms the Early Stage Index in the shorter hold periods, while the Early Stage Index outperforms over the longer time horizons.

Average Net IRRs and Net Investment Multiples continued to increase on a quarterly basis for the recent 2007-2010 vintages. Save the 2008 vintage at 13%, the average Net IRRs for the 2007-2010 vintages topped 15%. Additionally, the upper quartile threshold of Net IRRs jumped to over 20% for each of these vintages. Further, as Net Investment Multiples tend to build through the latter years of a fund’s life, the average for the 2007 vintage increased significantly to 1.8x, while the upper quartile threshold reached 2.0x. Considering the strong Net IRRs of the 2008-2010 vintages, a similar increase in Net Investment Multiples may occur as the companies in their portfolios continue to mature.

 


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