Venture Capital and the Finance of Innovation, Second Edition

62 CHAPTER 3 VC RETURNS
EXHIBIT 3-8
KLEINER PERKINS CAUFIELD & BYERS FUNDS
Fund Vintage Year
SUMMARY
Committed
Capital ($M) Net IRR Value Multiple Date Reported
II 1980 65 50.6% 4.3 Mar-04
III 1982 150 10.2% 1.7 Dec-04
IV 1986 150 11.0% 1.8 Dec-04
V 1989 150 35.7% 4.0 Dec-04
VI 1992 173 39.2% 3.3 Mar-04
VII 1994 225 1
121.7% 32.0 Mar-04
VIII 1996 299 286.6% 17.0 Mar-04
IX 1999 550 223.3% See text Mar-04
X 2000 625 217.5% 0.6 Mar-04
XI 2004 400 NA NA NA
XII 2006 600 NA NA NA
XIII 2008 700 NA NA NA
1 Only $170M of Fund VII was drawn down.
NOTE: There have been no publicly available updates of KPCB funds since December 2004.
Source: Dow Jones LP Galante, 2005 Private Equity Performance Monitor.
VC is a form of private equity, and for many years the returns to VC funds have indeed
been very private. In recent years, however, several new data sources have been made
available so that it is now possible to do some analysis of industry level and fund level
returns. In this chapter, we analyzed two sources of industry level returns: the Cambridge
Associates VC Index s (providing an upper bound for the net returns to the industry) and
the Sand Hill Index s (providing a lower bound for the gross returns to the industry).
Although both of these indices have superior performance to the NASDAQ, the riskadjusted
returns (to be studied in detail in Chapter 4) are close to zero. Although the
industry as a whole does not offer superior risk-adjusted performance, the evidence on fund
level returns suggests that top firms can consistently outperform their peers. To analyze
fund level performance, it is necessary to use different measures of returns from the
methods used at the industry level. The two main measures of fund level returns are
the IRR and the value multiple, the latter also known by many other names. Fund level data
is available in summary form from Venture Economics and in detailed form from Private
Equity Intelligence.