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Do you have any source for "Most VCs dreadfully under-perform the market".

rexreed 6y ago
A few places talk about the returns of most VC firms * https://blog.wealthfront.com/venture-capital-economics/ https://blog.wealthfront.com/venture-capital-economics/ "Over the past 10 years, venture capital in general has been a lousy place to invest. According to Cambridge Associates the average annual venture capital return over the past 10 years has only been 8.1% as compared to 5.7% for the S&P 500. That clearly does not compensate the limited partner for taking the increased risk associated with venture capital. However the top quartile (25%) generated an annual rate of return of 22.9%. The top 20 firms have done even better." * https://techcrunch.com/2017/06/01/the-meeting-that-showed-me-the-truth-about-vcs/ https://techcrunch.com/2017/06/01/the-meeting-that-showed-me... "A VC fund needs a 3x return to achieve a “venture rate of return” and be considered a good investment ($100 million fund => 3x => $300 million return). The graph below shows what percentage of VC firms accomplish this. As we can see, only the small green slice is bringing it home. The other 95 percent are juggling somewhere between breaking even and downright losing money (remember to adjust for inflation)." [See chart which shows that only 5% of VC firms return more than 3x, and a full 50% of firms return LESS than the money invested in them.] Also see Slide 14 in deck in comment posted above (https://news.ycombinator.com/item?id=23435889 https://news.ycombinator.com/item?id=23435889)
- andreas_mauer 6y ago
  Basically both articles said that VCs generate more returns than the S&P.
  - rexreed 6y ago
    As a group. But not individually. That's the point. It would be like saying that mutual funds in a category might outperform the market but individually 80% of them don't. Unfortunately you can't invest in VCs as a group. There's no index fund of VCs. So you have to pick individual ones. 95% of those underperform the S&P.
- petra 6y ago
  23% is a very good return. So just invest in VC's that are in the top quartile. It's probably not that hard to find that information , with reasonable accuracy.

A few places talk about the returns of most VC firms * https://blog.wealthfront.com/venture-capital-economics/ https://blog.wealthfront.com/venture-capital-economics/ "Over the past 10 years, venture capital in general has been a lousy place to invest. According to Cambridge Associates the average annual venture capital return over the past 10 years has only been 8.1% as compared to 5.7% for the S&P 500. That clearly does not compensate the limited partner for taking the increased risk associated with venture capital. However the top quartile (25%) generated an annual rate of return of 22.9%. The top 20 firms have done even better." * https://techcrunch.com/2017/06/01/the-meeting-that-showed-me-the-truth-about-vcs/ https://techcrunch.com/2017/06/01/the-meeting-that-showed-me... "A VC fund needs a 3x return to achieve a “venture rate of return” and be considered a good investment ($100 million fund => 3x => $300 million return). The graph below shows what percentage of VC firms accomplish this. As we can see, only the small green slice is bringing it home. The other 95 percent are juggling somewhere between breaking even and downright losing money (remember to adjust for inflation)." [See chart which shows that only 5% of VC firms return more than 3x, and a full 50% of firms return LESS than the money invested in them.] Also see Slide 14 in deck in comment posted above (https://news.ycombinator.com/item?id=23435889 https://news.ycombinator.com/item?id=23435889)

andreas_mauer 6y ago
Basically both articles said that VCs generate more returns than the S&P.
- rexreed 6y ago
  As a group. But not individually. That's the point. It would be like saying that mutual funds in a category might outperform the market but individually 80% of them don't. Unfortunately you can't invest in VCs as a group. There's no index fund of VCs. So you have to pick individual ones. 95% of those underperform the S&P.
petra 6y ago
23% is a very good return. So just invest in VC's that are in the top quartile. It's probably not that hard to find that information , with reasonable accuracy.