Net Cash Flows from VCs on Pace for First Positive Back-to-Back Performance Since Dot-Com Era
May 13, 2014
Through the first three quarters of 2013, VC net cash flow back to LPs was positive at $6.2 billion. Given the relatively strong fourth quarter for VC capital exited, 2013 will likely end up in positive territory and perhaps double the net cash flow recorded in 2012 ($3.4 billion). That would mark the first back-to-back positive performance for VC net cash flows since the dot-com era. Only one other year since 2001 was in the black (2003), as we detail in our upcoming 2Q 2014 Global PE & VC Benchmarking Report, to be released tomorrow.
On a global basis, we found that VC funds have underperformed their public-market equivalent for several consecutive years. PitchBook’s VC KS PME Benchmark, which compares global VC fund performance to the Russell 2000 Growth Index®, shows underperformance for every vintage year between 2001 and 2011, sometimes by significant margins. 2004 was particularly brutal—the 0.767 value for 2004 vintage funds means that investments in a typical vehicle from that year would be 76.7% the value of what they would be if they had been invested in the public markets instead.
Be sure to check tomorrow's newsletter for the report, which also includes details on performance metrics like IRRs, return multiples, quartiles and cash flows for PE and VC funds across several vintages. To check out a sneak preview of the report, click here.