Buyout and Venture Capital Funds
Buyout and Venture Capital Funds
Comparing Buyout and Venture Capital Funds
I’ve been looking through PitchBook’s latest report on private equity this week. One thing that struck me is just how poorly venture capital is still doing. The industry has been largely in decline since the dot-com tech bubble burst and it never really seemed to recover. Although there have been a lot of great venture-backed companies in the last ten years there have been some abysmal failures which I think has kept a bit of nervousness in investors. Which may explain why venture capital managed to raise just 6% of capital last year in private equity, according to PitchBook.
In another part of the report, which contrasts fund returns for different fund types, private equity funds have performed superior to venture capital funds. This should not come as a big surprise, when you remove the exceptionally high returns of 1999-2001 venture capital funds have not given the same level of returns as private equity funds have over time. This is largely because venture capital funds have a problem with exits but perhaps with the IPO market seemingly strengthening, venture capital funds will be able to successfully take their firms public.
The average IRR (Internal Rate of Return) for mature funds (vintage 2005 and older), shows that private equity funds, which are made up of Buyout, Growth and Restructuring funds, among others, have achieved consistently higher returns than venture capital funds. VC funds, which saw outsized returns during the technology bubble of the 1990’s, have found mixed results in the first decade of the 21st century.
To read the PitchBook report please visit this link
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Tags: Private equity funds, private equity and venture capital, private equity funds and venture capitalists, buyouts, returns, irr, venture capital funds
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