Some good news for the VC industry this morning as the NVCA released the Q4 2010 venture capital performance numbers from Cambridge Associates. According to their press release, venture returns improved at the end of the year in nearly every time horizon, marking the second consecutive quarter in which there has been meaningful improvement.
Mark Heeson of the NVCA believes, based on current exit market activity, that:
The venture industry is on a steady, upwards trajectory rather than experiencing a quarterly blip. In other words, barring any unforeseen market dynamics, returns hit bottom last year and are headed back up. Still, we do have a ways to go before the venture industry can boast the type of performance that compels limited partners to expand their venture capital allocation beyond what it is today.
While we typically discourage analysts from reading too much into the one year numbers, the figure is a good measure for recent exit activity. At the end of 2010, an opening of the IPO market and quality acquisitions brought the pooled industry 1-year performance number into positive, double digit territory. The first quarter of 2011 is showing a similar pace.
That is welcome news for fund managers that may be standing by for returns to improve before going to market with their next (or first) fundraising effort. More detailed information is available in the complete Cambridge report which details performance by vintage year and industry and on the NVCA blog.