Venture capital firms continue to struggle to return cash to investors, raising concerns about the long-term prospects of obtaining funding from limited partners. The 10-year return for VC funds dropped to -4.2 percent in the first half of this year, down from 14.3 percent a year ago and below the S&P 500 average return of -1.6 percent, according to a report from the National Venture Capital Association.
The numbers come from the NVCA’s Cambridge Associates U.S. Venture Capital Index, which reported on VC performance through the second quarter of this year. While performance has outpaced market indices over the 3-, 5-, 15- and 20- year horizons, the 10-year return reflects the ongoing challenges in producing worthwhile exits for investors. Even with a recent modest rebound in IPOs and mergers and acquisitions — there have been 21 IPOs in the first half of this year — venture-capital returns have not been significant for limited partners. This marks a full decade without positive returns collectively from venture firms, a crunch that will likely winnow out some firms. The last vintage year to return more than the capital paid in by investors was 1998, when investors made back $1.30 for every dollar they invested.
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