Long-Term Venture Capital Gains Steady as Medium-Term Returns Falter

April 11, 2005 (PLANSPONSOR.com) - Long-term venture capital returns remained steady at the end of 2004, according to an industry group, but medium-term performance continued to feel the pain of the technology bubble burst.

According to Reuters, venture capital returns for the 10- and 20-year horizons were 26% and 15.7% respectively at the end of 2004, according to a report from the National Venture Capital Association and data from Thomson Venture Economics . However,  venture capital’s five-year performance looks to be declining, down 1.3% as funds booked losses from investments they made in upstarts during 1999 and 2000, the group said.

The group also indicated that an improving market for initial public offerings and merger and acquisition deals has boosted short-term fund performance as of late.

Last year, 93 venture capital-funded companies raised a total of $11 billion through IPOs, while 333 venture-backed companies were bought for a disclosed value of $15.1 billion, which is the highest combined value since 2000. A result of this was that short-term venture capital performance improved for the one- and three-year time horizons, the group said.

According to the group, the 10- and 20-year returns for all private equity (not just venture capital) was 12.7% and 13.8%, respectively.