VC Performance: Pay Attention To The 9-Year Horizon

Venture capital performance fell across all time horizons in the fourth quarter of 2008, according to data released this morning by the National Venture Capital Association and Thomson Reuters (publisher of peHUB). On the up-side, performance remained positive for all horizons three-years and out, with venture capital continuing to outperform public market indices — including the Nasdaq and S&P 500 — for all measured time periods.

What’s essential to realize, however, is that the most important time horizon is not five years, ten years or 20 years. Instead, it’s nine years — because that correlates to the end of the dotcom boom. We all know that VCs did gangbuster business between 1996 and 1999, but it’s in 2000 when things began to go south.

So we called up the Thomson Reuters data folks, and found out that the nine-year pooled IRR horizon is just 1.3 percent. For context, the 10-year return stands at 15.5 percent. Come January 1, long-term VC performance data will look very different…