BVCA Private Equity and Venture Capital ... - BVCA admin

8 BVCA Private Equity and Venture Capital Performance Measurement Survey 2011
Highlights
Continued
Continuing with an additional piece of analysis
first introduced to the Survey in 2008, this
section and the accompanying table overleaf
explore the underlying performance of venture
capital funds. Though always directly compared
to the US venture scene, which is itself unique
in that it is highly sophisticated and mature,
the UK venture sector of today contains a
wealth of opportunity for both performance
and inward investment.
The analysis of purely commercial venture
funds shows that the sector has come out of the
dotcom bubble in a relatively robust fashion.
Yet to provide a more holistic and balanced
assessment, we segment our funds into three
categories according to their respective vintage
year bands, specifically, Pre-Bubble (1980 to
1997), Bubble (1998 to 2001) and Post-Bubble
(2002 to 2007). Funds raised prior to the dotcom
boom have produced a pooled average IRR
of 11.9% per annum.
Funds with a vintage at the height of the bubble,
between 1998 and 2001, have clearly endured a
painful time, not least because of the inflated
valuations that were prevalent in both the
technology sector and venture capital industry
at the time. Very few venture players came
out of the period unharmed, as large and
unsustainable amounts of capital flooded into
the industry and depressed the real returns to
investors. Within this context, it is not surprising
that dotcom bubble-vintage funds returned a
collective loss of, on average, 3.9% per annum.
As the UK venture scene continues to mature,
the performance picture is responding and
adjusting accordingly. The 2002 to 2007
(post-bubble) fund vintages are at a critical
juncture with some shortly to commence their
divestment phase but many others still being
at the lower end of their j-curve. This is partly
reflected in the pooled average of 5.7%, with
top-decile funds returning more than 20.4% p.a.
to their investors. As these post-bubble vintage
funds move further into the divestment phase,
and the macroeconomic picture improves,
today’s return is likely to provide a solid
platform for higher performance tomorrow.