Despite economic slowdown VC returns remain positive in Q1 2008 - NVCA

Summary:
Venture capital returns, as measured by the private equity performance index (PEPI), have been falling across all investment horizons ending Q1 2008, but still compare favourably to stock indices like the NASDAQ and S&P500 according to NVCA. The economy’s biggest effect on the venture market has been indirect — the IPO and mergers/acquisitions markets are hurting, which means VCs have to pump more money into later-stage companies. Causes lower returns. According to Mark Heesen, returns will fall even further if the exit market doesn’t improve. (Published: 29/07/08)

Notes:

• one-year private equity performance index (PEPI) showed the greatest change from
  Q4 2007
• 7.6 point decrease to 13.3% in Q1 2008.
• historically, short-term horizons show significant fluctuations quarter over quarter based on large exits impacting the return
• next largest consecutive quarterly change occurred in the ten-year time horizon
  
• PEPI decreased by 1.1 points quarter-over-quarter
• three year performance also posted a modest decline from the previous quarter
• decreasing .2 percentage points from 9.7% in Q4 2007 to 9.5% in Q1 2008
• five-year and twenty-year performance figures showed modest quarter-over quarter increases
  
• to 9.1% and 16.8%, respectively

• Venture returns across all horizons, except the five-year horizon, outperformed public
  market indices, NASDAQ and the S&P 500, through 3/31/2008

• Mark Heesen:
• "The IPO market has now been essentially shut down for venture-backed companies for over seven months. Combined with a skittish M&A market, shorter term performance returns are and will continue to be impacted."
• "Our asset class continues to out perform many other investment alternatives
  including the public markets over the long term. But we will need to see the exit markets improve dramatically to maintain that position in the coming year."