
Paul Kedrosky's Infectious Greed: VC Performance by Quartile and Vintage Year - veritas
http://paul.kedrosky.com/archives/2007/03/13/vc_performance.html
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pg
This graph contains pretty dramatic news: the lowest quarter of VCs used to
make small positive returns up till 1997, and since then they've consistently
lost more and more money. It looks like a lot of dumb money arrived in 1997.

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veritas
I know the article says to ignore the trends after 2003 (too soon to tell
period), but the downard slope of both quartiles is still interesting and I
wonder why it's there. Lot of web 2.0 investments tanking perhaps?

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pg
The downward slope is almost certainly due to the increase in money being put
into VC funds. Without a corresponding increase in the number of promising
startups, the returns have to fall.

The graph is a visual illustration of the standard VC complaint: too much
money chasing too few deals.

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far33d
However, a 2003 vintage fund probably has had very few (if any) exits. I would
like to understand what exactly the y-axis of this graph models, and how it
accounts for performance. Is performance based on the value actually returned
to investors (in which case, 2003 and newer funds would be expected to have
little or zero return), or the current valuations?

There's very little I dislike more than graphs with unlabeled (or ambiguous)
axes.

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phil
far33d, I think you're right about the y-axis.

Here's a relevant page from Cambridge Associates (the source for this data):
https://www.cambridgeassociates.com/Indexes/

I couldn't find the exact stuff Kedrosky graphed but most of their stats are
for net end-to-end return to LPs, which would be value actually returned to
investors.

