A generation of venture capital funds now reaching middle age is clearly benefiting from the business’ up-cycle.
This is apparent in the Washington State Investment Board’s Pathway and Invesco portfolios, where funds from the 2006 to 2008 vintages are turning in solid performances.
This group of smart performers includes funds from Spark Capital, Union Square Ventures, Battery Ventures, New Enterprise Associates, Technology Crossover Ventures and Insight Venture Partners. Vivo Ventures II also is showing good returns.
In general, funds begin to settle into their eventual IRRs when they reach six or seven years of age. By then, their portfolios are established, their investments are reaching a growth phase and potential exits are beginning to take shape.
If this rule of thumb holds true among the WSIB venture holdings, investment results will be good. Seventeen of the 19 venture funds in the portfolios minted between 2006 and 2010 had IRRs in positive territory and 14 of them boasted IRRs above 10 percent, according to a portfolio report updating performance to September 2013.
The top two funds were Spark Capital II from 2007 and Union Square Ventures 2008. Spark Capital II had an IRR of 42.98 percent, down noticeably from June 2012, with distributions greater than capital invested.
Union Square Ventures 2008 had an IRR of 38.62 percent, also down significantly. So far it has not made a distribution.
Battery Ventures VIII Side Fund, third on the list, stands out for sharp increase in distributions over the period while its IRR remained steady at 26.76%. (The 2007 vintage main fund, Battery Ventures VIII, also achieved a sharp rise in distributions, though its IRR ticked down to 12.67%.)
Another stand out is New Enterprise Associates 13, which witnessed a big jump in its IRR to 24.04 percent as distributions grew nicely. Austin Ventures X also demonstrated nice improvement with its IRR rising to 10.47%. Vivo Ventures VI, TCV VII and Insight Venture Partners VI are top performers as well, according to the recent portfolio report.
At the bottom of the portfolio are Intersouth VII and Menlo Ventures X, both from 2006.
The accompanying table lists the 19 funds with their commitments, distributions and IRRs.