Exits push VC performance to positive marks

An improved exit market for VC-backed companies pushed venture capital performance trends to the positive side across all investment horizons that ended June 30, 2007, according to Thomson Financial (PE Week) and the National Venture Capital Association.

The 5-year private equity performance index (PEPI) showed the greatest increase from Q1 with a 1.9 point increase to 4.6% at the end of Q2. The increase is noteworthy in this time horizon because it stands as evidence of an improved exit market for VC-backed companies since the Internet bubble burst.

“We have seen constant improvement in the five year performance horizon for the last several quarters, reflecting continued healthy exits particularly in the last year,” said Mark Heesen, president of the NVCA, in a statement.

Short-term horizons, however, showed marginal fluctuations quarter over quarter. The 1-year PEPI increased by .7 points from 16.8% to 17.5% quarter over quarter while 3 year performance increased to 10.2% in the period ending Q2 2007 from 9.7% in the period ending Q1 2007.

Ten-year performance, the only time horizon with a period over period decline, showed a decrease from 21.0% to 19.0% in Q2 2007.

“To maintain this positive momentum and continue with the long term out performance of the public markets, we will need to see more exits in terms of IPOs and acquisitions in the coming year,” Heesen said. —Alastair Goldfisher