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It’s been a rough few years for venture capitalists, with the IPO market in the tank and venture returns slumping. And while things have improved slightly in recent months as large M&A deals occur, the venture capital industry remains in a state of flux as partners grapple with the new reality of startup investing.

To get a better sense of what’s happening out there, I took a look at the Washington State Investment Board’s quarterly IRR report.

Venture capitalists hate the idea of publicly disclosing their performance numbers, even more so in recent years as things headed south. Some firms have gone so far as to avoid taking money from public institutions in order to stay out of the spotlight. I guess they’d like to keep private equity … private.

But most venture firms have some public money in their funds, and Washington State historically has allocated a chunk of change to the private equity business. Since 1981, the WSIB — which invests capital on behalf of teachers, firefighters and other public employees — has generated $11.5 billion in profits through private equity. Not bad.

Before we get to the numbers, a few disclaimers. The WSIB report is based on the quarter ended September 30 in part because it takes time to track down the information.

Also, many VCs don’t like the metric that is traditionally used to benchmark success. Known as the internal rate of return or IRR, VCs will tell you that the number is hard to interpret and can be misleading because time plays such an important factor.

It’s also extremely hard to value portfolio companies which have yet to generate a real return — typically through an IPO or acquisition. Because of that, many VCs prefer to look at their performance based on exits — how much cash went into the business initially and how much came out at exit. (The WSIB has a long disclaimer on all of this on its Web site).

Nonetheless, for data hounds like us, the WSIB IRR report offers some interesting insights on how the money is flowing. Only a few Seattle area venture firms have taken money from the WSIB over the year, so it’s not like the report serves as a scorecard of who is winning or losing. (By my analysis, it looks like just Frazier, OVP, Phoenix and Materia are represented).

It is also worth noting that venture capital represents a small sliver of the overall $79.4 billion in assets that the investment board manages. (Private equity as a whole, including larger buyout funds, stands at $11.5 billion).

As a class, venture capital totaled just $1.1 billion as of September 30th, with an IRR of 10.3 percent. That lagged the total private equity class, which showed an IRR of 13 percent.

So, without further ado, here are the top five and bottom five VC funds at the WSIB.

1.) Menlo Ventures VII: Formed in 1997, this Silicon Valley fund blows the competition away with a 135 percent IRR. The WSIB committed $25 million to the fund, and as of last September it had distributed $115 million. Menlo is probably best known in these parts for its investment in F5 Networks, a publicly-traded Seattle networking company with a market value of $7.6 billion. Interestingly, Menlo has been a very strong performer over the years — Menlo IV and Menlo VI generating returns just above 40 percent. No wonder that the WSIB has continued to pump money into the firm, including a $150 million commitment in the most recent 2006 vintage (Menlo X) which is currently down 7.75 percent. That’s not uncommon for newer funds which have yet to produce many exits. But there could be some returns on the horizon at least for some of the older Menlo funds as the firm was  a backer of 3Par, the data storage company which sold to H-P for $2.3 billion last September. Menlo has a few other Seattle area companies in its portfolio, including RF Surgical Systems and OnRequest Images.

2.) Austin Ventures IV: Formed in 1994, just as the seeds of the Internet boom were being planted, this Texas-based fund shows an IRR of 73 percent. The WSIB invested $15 million, and so far the fund has distributed $126 million. The firm, which manages $3.9 billion, doesn’t do much investing in the state.

3.) Oak Investment VIII: A long-time investor in the state, Oak’s track record has been somewhat mixed. But fund VIII — formed in 1998 — produced a nice 55 percent return. The WSIB committed $20 million, and the firm distributed $35 million. Oak’s past bets in the Seattle area include Ontela, Cobalt Group, Internap, Primus Knowledge and the small investment fund Cedar Grove Investments. The firm also was an investor in aQuantive, which sold to Microsoft for $6 billion. (It’s unclear to me, however, whether Oak benefited much from that sale or had already cashed out after the company’s IPO).

4.) Interwest VI: The WSIB has only invested once in this Silicon Valley firm whose investments include Seattle software company Varolii. The Interwest fund — which received $10 million in 1997 from the WSIB — produced an IRR of 48.8 percent.

5.) Warburg Pincus Ventures: The venture arm of the giant private equity firm produced 48.2 percent return with its fund, created in 1994. The WSIB provided $100 million to the fund.

Now, here’s the list of the bottom five, a list most venture capitalists don’t want to be on. Now, VCs are optimistic folks, and they’ll tell you that the next big deal out of one of these funds could be just around the corner.

1.) KBA Partners II: This fund, formed in 1989 with a $42.6 million capital commitment, shows a negative 42 percent IRR. The fund has returned just $1.5 million over the past 21 years.

2.) Telecom Partners III: Formed during the boom era of 1999, this fund is down 40 percent. It received $50 million, and has distributed back $4.9 million as of September 30th.

3.) OVP Venture Partners VI: The granddaddy of Seattle’s venture capital community has yet to make much money for the WSIB. This fund, formed in 2001 as the dot-com bust was just starting to occur, shows a negative IRR of 17 percent. The WSIB committed $4o million, and OVP has distributed $5.6 million. In fact, OVP just missed by a hair having its second WSIB-backed fund, OVP VII, with a negative 11.28 percent IRR, on the list.

4.) Menlo Ventures VIII: The ups and downs of the VC business are represented in Menlo, which has the top performing fund in the WSIB portfolio. But also has this 1999 vintage year fund, which is down 13.9 percent. The WSIB committed $50 million, and distributions now stand at $15.9 million.

5.) U.S. Venture Partners VII: The Silicon Valley firm, a favorite of the WSIB over the years which has backed four of its funds, shows a negative 11.5 percent IRR on this 2000 year fund. Of the $39 committed, just $10 million has been distributed. However, it is worth noting that the firm’s 1996 fund has made money for the WSIB, showing a 26.2 percent return.

For a closer look at the performance of buyout funds backed by the WSIB, check out which put together a similar list for that asset class earlier this week.

John Cook is co-founder of GeekWire. Follow on Twitter: @geekwirenews.

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