With the exception of the 10 and 15-year returns which declined slightly, venture capital performance improved across most time horizons as of the end of the third quarter of 2010, according to the Cambridge Associates U.S. Venture Capital Index®, the performance benchmark of the National Venture Capital Association. While the shifts were mild in both directions, the overall performance numbers indicated the first signs of recovery since the financial crisis of 2008. Venture capital performance also surpassed the public market indices for the 3-, 5-, 15- and 20-year time horizons.
“The third quarter of 2010 brought a change of direction to a performance trend that has been pointed downwards for several quarters,” said Mark Heesen, president of the NVCA. “An improved exit market helped boost the one year returns to positive territory while applying the brakes to the negative slide in the 3-, 5-, and 10-year horizons. Based on the current market dynamics, we would expect this positive reversal of fortune to continue into 2011 and bring the venture capital industry back into positive territory.”
Theresa Sorrentino Hajer, research consultant at Cambridge Associates said: "Conditions in the venture capital industry have improved, reaching a more favorable risk-return balance. M&A activity was up over the prior year, and post-IPO performance has been relatively strong, in line with the steadily improving public markets. One would expect that the improved exit markets, reduced fundraising and moderated pre-money valuations and investment levels will bolster the long-term viability of the VC industry."