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:
Author: Robert Buderi
Bob is Xconomy's founder and chairman. He is one of the country's foremost journalists covering business and technology. As a noted author and magazine editor, he is a sought-after commentator on innovation and global competitiveness. Before taking his most recent position as a research fellow in MIT's Center for International Studies, Bob served as Editor in Chief of MIT's Technology Review, then a 10-times-a-year publication with a circulation of 315,000. Bob led the magazine to numerous editorial and design awards and oversaw its expansion into three foreign editions, electronic newsletters, and highly successful conferences. As BusinessWeek's technology editor, he shared in the 1992 National Magazine Award for The Quality Imperative.
Bob is the author of four books about technology and innovation. Naval Innovation for the 21st Century (2013) is a post-Cold War account of the Office of Naval Research. Guanxi (2006) focuses on Microsoft's Beijing research lab as a metaphor for global competitiveness. Engines of Tomorrow (2000) describes the evolution of corporate research. The Invention That Changed the World (1996) covered a secret lab at MIT during WWII. Bob served on the Council on Competitiveness-sponsored National Innovation Initiative and is an advisor to the Draper Prize Nominating Committee. He has been a regular guest of CNBC's Strategy Session and has spoken about innovation at many venues, including the Business Council, Amazon, eBay, Google, IBM, and Microsoft.
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