On: Most venture capital funds lose money

[dgabriel]

I am hardly surprised that the ten year return rate is as miserable as it is. Ten years ago, in 2000, we were in the midst of the tech bubble, and many companies got funding that they should not have. It's like looking at the ten year return rate on property purchased in Miami in 2006.

edit: pets.com evaporated 300 mil in less than a year in 2000, and that's just one example.

[meterplech → dgabriel]

In general I am shocked whenever a single anecdote like this is reported as the truth. They try to add some cachet by saying they looked at 1,300 firms, but picking only one start date is awful.

I'd be really interested in average 10 year returns on VC from the past 10 years. I.e funds raised from 1990 to 2000. Obviously even more interesting will be how the current funds do.

[secretasiandan → meterplech]

6th paragraph

"The median net return to VC fund investors has not been positive for any vintage year since 1998."

I'm curious, did you read the article and miss all the talk about vintage years? Or did you only skim it? Or did you only read the comment? Or did I misinterpret your comment?

[meterplech → secretasiandan]

I may not have known what the terms meant, but I took that to mean 10 year returns on funds. So, I thought it was only referring to funds started in 1998, 1999, and 2000. Still definitely not a overwhelming amount of data. I forgot to mention the other years in my comment. However, the general idea of the comment still holds- they took an exact bit of data, like 10 year returns for the worst years of funds to determine that VCs aren't valuable. As has already been commented, if you looked at the 15 or 20 year returns you will be amazed in the other direction.

[dgabriel → meterplech]

The 15 and 20 year returns are stunning.

[secretasiandan → dgabriel]

The 15 year ago vintage class does have amazing returns.

However, assume for a second we can take different vintage years and say that return(t-20 to t-0) = return(t-20 to t-15)*return(t-15 to t-0).

Then all the money was made from t-15 to t-10 since the t-10 vintage class has basically zero returns and the t-20 returns are approximately the t-15 returns annualized over 20 years instead of 15

[borism → meterplech]

there are 15 and 20 year columns in the table under that post

[mindball → dgabriel]

300 mill is less than a year is just nuts. Could you imagine what that money could have done for other ventures?

[dgabriel → mindball]

I imagine you could hand out a million dollars to 300 random people and see a much better return rate.

[eftpotrm → dgabriel]

A better return than nil isn't hard, though...