Contacts:
Jeanne Metzger, NVCA, 703-524-2549 ext. 116, jmetzger@nvca.org
Joshua Radler, Venture Economics, 973-353-7139, joshua.radler@tfn.com
PRIVATE EQUITY PERFORMANCE CONTINUES TO REFLECT
INDUSTRY REALITIES
Short Term Performance Continues to Suffer From Lack of Exits
August 7, 2002 – Newark, NJ - Thomson Venture Economics and the National Venture Capital
Association (NVCA) announced the private equity performance results for Q1 2002, the latest data
available. While short term results continue to be negative, they showed an increase for a second straight
quarter, with a one-year return for venture capital partnerships of –24.4% as compared to –27.8% at the
end of Q4 2001. This possibly indicates that the worst may have already passed and the slow climb to
recovery has begun. Much of the performance results can be attributed to the dearth of exit opportunities in
the public and M&A markets as the volatility in the public markets has all but shut down the IPO market
and kept technology company valuations at low levels.
According to Jesse Reyes , Vice President at Venture Economics, “VCs have a lot of good companies ready
to exit, however the roiling public markets, and the downward pressure on valuations continue to degrade
short term performance. The industry needs exits to realize returns to their investors.” Consequently, time
will only tell how this will affect long-term returns, which have continued to outperform the public
markets. However, it is likely given the drop in valuations, the continued volatility in the public markets,
and the lack of exit opportunities that returns may remain in the negative for some time.
Investment Horizon Performance as of 3/31/2002
10 20
Fund Type 1 Yr 3 Yr 5 Yr Yr Yr
Early/Seed VC -31.8 65.0 48.3 32.0 20.6
Balanced VC -19.2 36.7 31.2 22.0 15.2
Later Stage VC -17.0 19.1 21.6 24.0 16.9
All Venture -24.4 41.0 34.9 25.9 17.3
All Buyouts -10.7 -0.6 4.6 10.5 14.0
Mezzanine -3.2 7.0 8.1 11.1 10.9
All Priv Equity -14.6 10.0 13.5 16.6 15.7
Source: Thomson Venture Economics/National Venture Capital Association
Thomson Venture Economics’ Private Equity Performance Index is calculated quarterly from Thomson Venture Economics’ Private
Equity Performance Database (PEPD). The PEPD tracks the performance of 1400 US venture capital and buyout funds formed since
1969. These statistics are calculated net to investors (net of fees and carried interest) using both cash on cash returns (distributions
and capital calls) and the unrealized net asset value of funds as reported by private equity fund managers. For further information on
how these returns are calculated please visit the methodology section of our website
(http://www.ventureeconomics.com/vec/methodology.html).
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equity professionals worldwide. Thomson Venture Economics offers an unparalleled range of products
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For over 40 years, Thomson Venture Economics has been tracking the venture capital and buyouts
industry. Since 1961, it has been a recognized source for comprehensive analysis of investment activity
and performance of the private equity investment community, in-depth industry knowledge, and proprietary
research techniques. Private equity managers and institutional investors alike consider Thomson Venture
Economics information to be the industry standard. For more information about Thomson Venture
Economics, please visit www.ventureeconomics.com.
Thomson Venture Economics’ Private Equity Performance Database provides an array of benchmarks
ranging from individual vintage year benchmarks, industry returns, cashflow and overhang analysis, all of
which are available on our VentureXpert web product. In addition to the web product, Thomson Venture
Economics offers various books and reference guides under our Investment Benchmark Report series. For
further inquiries, please contact Neil Goldstein at (415) 732-6293 or via email at neil.goldstein@tfn.com.
The National Venture Capital Association (NVCA) represents over 450 venture capital and private
equity organizations. NVCA’s mission is to foster the understanding of the importance of venture capital
to the vitality of the U.S. and global economies, to stimulate the flow of equity capital to emerging growth
companies by representing the public policy interests of the venture capital and private equity communities
at all levels of government, to maintain high professional standards, facilitate networking opportunities and
to provide research data and professional development for its members.
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