Larger VC funds outperform smaller funds in 2017

For nearly the second year in a row, larger venture funds outperformed smaller ones in 2017, a reversal brought on by an improving IPO market.

What’s more, the gap between the two groups widened toward the end of the year. And with the IPO market chugging along in 2018, the divergence could have continued at least through the first nine months of 2018.

The rolling 1-year IRR for VC funds more than $250 million in size was 12.94 percent in the fourth quarter of 2017, according to PitchBook, more than double the IRR for funds under $250 million of 6.15 percent.

By comparison, in the first quarter of 2017, funds above $250 million had a 1-year rolling IRR of 6.99 percent and smaller funds had an IRR of 2.02 percent.

Larger funds have held the performance advantage over their smaller counterparts since the second quarter of 2016. But the top position flips back and forth frequently.

Most of 2015 saw a reverse with smaller funds coming out on top, according to a PitchBook study. This was true, as well, in 2010 and 2011.

Supporting the performance gains at larger funds toward the end of 2017 were IPOs of Razer, Strich Fix and MongoDB, PitchBook said.

The research firm also found that the capital called by venture funds hit a record $57.1 billion in 2017, exceeding the $54.7 billion of 2000. Still it trailed distributions in 2017 of $77.8 billion.