Venture capital firms produce positive returns, but they are weakening

Venture capital firms have produced returns that exceed market averages, with late-stage venture capital firms doing especially well.

Firms investing in later-stage companies have done well in part because of the solid IPO and merger and acquisition market over the past few years, though that is changing. These firms saw returns of 31.9 percent over the last year, and 11.7 annually over the last three years. That compares to favorably to the 2.1 percent increase in the S&P, a proxy for the overall market, over the past year, and 6.4 increase in the S&P over the last three years.

The data, compiled through Dec 31, 2007, was published by Thomson Reuters and the National Venture Capital Association.

See table above.

Not evident at first glance, however, is that one year returns through the fourth quarter actually declined from previous increases. Venture capital firms saw a 8.9 point decrease in their one-year performance to 19.5 percent, from a 28.4 increase experienced in the year through the third quarter 2007.

You’ll see those numbers continue to decrease over the next year, if the IPO market remains closed.

Next Story: Lead-gen site Leadpoint raises $6M, doing fine despite economic downturn
Previous Story: Blockbuster starts selling video games and consoles