Venture Performance Strong in 2007—Questions Raised About New Year

The data are in on fourth quarter 2007 venture capital returns, and it was a very good year for venture funds. They returned 19.5 percent for the year, far outstripping the stock market.

That’s the good news in figures released today by Thomson Reuters and the National Venture Capital Association. But the picture is more mixed as you look more closely at the numbers. For starters, the fourth quarter showed a big falloff from the rest of 2007, pulling down the total return for the year, which had been running at 28.4 percent through the first nine months.

Overall, the figures provide a solid testament to venture funds, as the NVCA data shows that all stages of funds—early, balanced and later-stage—have outperformed the stock market over time. But the scary part might be the warning in today’s release, which carried the sub-heading, “Economic Troubles Could Impact Returns in 2008.”

“A continued economic slowdown and lackluster IPO market could begin to impact short term venture capital returns in 2008 as it has traditionally been the larger public offerings that drive the one and three year return numbers,” said NVCA president Mark Heesen in a statement. He tried to put some good light on the numbers, by adding, “However, we would have to experience a prolonged stagnation, more than a year of poor exit opportunities, for the ten and twenty year returns to suffer.”

Here’s the table of today’s data:


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