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Comparing the Performance of Venture Capital Funds by Vintage Year – January 2015

by Madeleine Stretton

  • 16 Jan 2015
  • PE
  • VC

Venture capital funds have long been a cornerstone of the private equity space, accounting for a large proportion of capital invested in the asset class. Preqin’s Performance Analyst online service tracks performance metrics for over 1,700 venture capital funds, allowing for the comparison of venture capital fund performance by vintage year. One of the most useful indicators of fund performance is the net multiple, which enables investors to assess how much they have gained, or are likely to gain, from a fund investment in relation to their initial contribution.

The above chart shows the median and weighted net multiples for venture capital funds by vintage year between 1996 and 2014. The late 1990s was a period of peak performance for venture capital funds due to the ‘Internet Bubble,’ which explains the high multiples at this time. 1997 vintage funds, the peak year for venture capital performance, produced a weighted net multiple of 3.22x and a median net multiple of 1.81x. It should be noted that weighted net multiples also take into account fund size, so it is likely that the high weighted multiple represents fund managers taking advantage of the strong financial climate and establishing larger funds. 

Moving into the early 2000s, net multiples for venture capital funds were much lower. In particular, vintage year 2000 funds produced median and weighted net multiples of 0.92x and 0.97x respectively. Moving forward, the median net multiple looks to have remained relatively consistent up until 2010, whereas there is more variability in the weighted net multiples over the same timeframe. In 2003 vintage funds, we can see one such example of the difference between median and weighted multiples: funds of this vintage produced a median net multiple of 1.18x compared to a weighted net multiple of 1.77x, indicating stronger performance from larger venture capital funds at this time. 

As we move into the 2010s the median and weighted net multiples are more closely matched. However, it is still early in the lifecycle of these vehicles and we may see a more contrasting measure of performance at a later stage. 

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