There’s certainly been some good news in the venture business in recent weeks, with Yahoo announcing its $1.1 billion deal for Tumblr and Seattle software company Tableau Software pricing shares in a spectacular IPO.
Those types of deals offer hope for venture capitalists, many of whom have been battered in recent years.
But, for now, as the chart above shows, returns are still stuck in neutral. And judging against many time frames, you’d still be better off putting your money to work on Wall Street.
The 10-year horizon was a bright spot, with VC returns increasing to 6.9 percent over the previous quarters. However, investors still would have made more money on Wall Street, since the Dow and Nasdaq were up 7.3 and 8.5 percent, respectively, for that period.
The Dow and Nasdaq also outperformed venture capital returns for the one-year period — with the Nasdaq’s performance more than double that of VC returns. (Note: The recent VC numbers do not include any results from 2013, which means deals like Tumblr and Tableau would not be factored in).
For the three and five-year time periods, returns fell during the quarter ended December 31, 2012. For the three-year period, VC returns came in at 11.4 percent, just edging out the Dow Jones Industrial Average and Nasdaq. For the five-year period, VC returns were 4.1 percent, ahead of the 2.6 percent returns for the major stock indices.
NVCA president Mark Heesen noted that 2012 was the “first post-bubble year in which venture funds collectively distributed more cash to limited partners than they brought in.”
“While this favorable ratio was likely driven by several large exits, we are hopeful this trend will take hold in 2013 and we can begin to fortify returns within the asset class,” said Heesen. “With lower IPO and acquisitions volumes in the first half of the year, we are counting on a more robust exit market beginning in the third quarter to continue along this constructive path.”
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