Venture Capital Returns Continue to Plummet

The 10-year return, the most frequently cited metric to gauge the health of venture capital firms, declined 8.4% for the period ending September 30, 2009.

(February 3, 2010) — Venture capital 10-year returns continue to fall for the 5 and 10-year periods ending on September 30, 2009, according to the Cambridge Associates U.S. Venture Capital Index.


Ten-year returns fell 8.4% for the period ending September 30, 2009, from 40.2 percent in the 10 years ending Sept. 30, 2008. Additionally, the 5-year returns declined to 4.9% from 10.7% one year ago.


“It has taken a full decade after the technology bubble burst for the venture industry to fully realize the impact of that era and its aftermath,” said National Venture Capital Association President Mark Heesen. He added that despite the significant returns created by the dot-com tech boom of the late 1990s, the new reality is much more somber for many venture firms. “There are still healthy returns to be made in venture capital, but until the venture community sees a more vibrant exit market we do not expect marked improvement overall,” he stated.


While returns are dropping, investments continue to rise after a year when venture capital was at a low point, according to Tech Crunch. In the fourth quarter of 2009, venture capital investments rose 113% from a year ago to nearly $15 billion.

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