Venture Capital

Standard benchmarks do not always capture the true story behind a fund’s performance. To provide a more complete breakdown of a fund manager’s performance, benchmarks should consist of custom peer group comparisons and vintage-matched return analyses. Contextualizing returns this way ensures manager evaluations reflect true value creation, not just headline numbers.

Venture capital performance can be broken down to more than just a return multiple or IRR. Through targeted attribution analysis, fund managers can quantify how they create value in their portfolio companies, allowing them to communicate their investment theses more clearly and defensibly to current and potential investors.

There is no way around it: fundraising in the venture capital space is extremely difficult and can be daunting for even the most seasoned manager. First-time managers need to have a clearly identified value proposition and investment thesis that they can defend and communicate to potential investors. This is essential, as an emerging manager likely does not have the track record most potential investors look for when making capital allocation decisions.

Limited partners interested in venture capital must understand the unique risk and return profile that venture capital offers. Even more, potential investors must also ensure they have an internal team with the required skill set needed to identify the right managers.

Very. Venture capital is defined by a very wide range of dispersion of returns – more so than any other asset class. This means that the best performing fund other managers by a large margin. Even more, research suggests that these high-performing managers tend to reproduce this performance. These two characteristics highlight just how important it is to select the right manager when making allocations to venture capital.