Jul. 25–National venture capital funds lost 29.1 percent for the year that ended March 31, and Colorado-based funds lost 39.6 percent for the same period, according to a report from Thomson VentureEconomics.
But John Taylor, vice president of the National Venture Capital Association, said he doesn’t worry too much about it.
“You don’t call your broker and sell an investment portfolio like a stock,” he said. “The nature of venture capital requires longer-term, usually 10-year, investments.” According to Venture Economics, national venture capital 10- and 20-year returns were up 26.4 percent and 16.5 percent, respectively.
“If you look at the national long-term past performance, the industry has paid 15 to 20 percent — better than double what the markets have paid, and I see no reason why that won’t continue,” he said.
But Colorado’s 10- and 20-year returns are negative 17.4 percent and 15.1 percent, respectively.
Taylor said that doesn’t mean the companies that Colorado venture capital funds invested in have done poorly.
“These figures can’t tell us how well these companies are doing because the returns are figured on a fund level,” he said. “The geographic cut is very much a statement on the sectors and stages firms have invested in. In Colorado, a lot of money went into large telecom deals that just didn’t work out.” It is also hard to use the numbers to comment on Colorado’s venture capital industry performance, said Chris Wand, principal at Superior-based Mobius Venture Capital. “Depending on the funds included in this study, the data may be skewed.” Firms calculate returns a little differently, and, even if they are in the same state, different factors affect their performance, he said.
But in the long term, national venture capital returns should stay strong.
If the public markets consistently improve, new initial public offerings will be more likely to occur, said Jesse Reyes, vice president of Thomson Venture Economics.
“The ability for a venture firm to exit portfolio companies will improve returns in both short-term and overall,” Reyes said.
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