VC recorded lower IRR than several other asset classes from 1999-2017

The equal-weighted internal rate of return (IRR) for the venture capital (VC) industry was 6.6 percent between Q2 of 1999 and Q2 of 2017, according to the 1Q 2018 PitchBook Benchmarks. Over that 18-year timespan, several other asset classes – such as private equity (10.5 percent), debt financing (10.1 percent), fund-of-funds (8.1 percent) and several stock market indices – significantly outperformed the VC industry’s equal-weighted IRR.

The report also highlights that increased fundraising by a new class of mega-VC funds ($1 billion or more raised) has led to larger individual rounds of investments, at faster rates, than ever previously recorded. The average VC fund that was raised in the early 2000s called down less than 60 percent of capital commitments by its third year, but that has steadily increased to roughly 70 percent in more recent years.  

The report also provides users with historical data on IRR that compares venture capital and private equity to broader asset classes (e.g., the S&P 500, Russell 3000, fund-of-funds).  To learn more about the potential trends of 2018, read SSTI’s special two part series that covered overall VC industry trends and technology areas poised for more investments.