Venture Capital Investment and Returns by Fund Stage

The PE industry has evolved significantly during the past few decades. This section explores selected historical trends in the VC arena, affording the reader a unique perspective on previous data and trends in the industry, beginning with a historical analysis of VC investment and returns by fund stage.

Decades ago, many VC funds had a balanced focus and selected investments in companies at varying stages of development. LPs, in general, viewed the asset class as one entity, rather than an amalgamation of numerous entities as they do today.

When placing capital with GPs in the current market, LPs generally select a fund to fill a very specific piece of their investment pie, and funds are highly specialized to meet this task. Exhibit 2.9 illustrates the historical percentage of capital placed with various types of VC funds. In this era of increased fund specialization, the amount of capital placed with balanced VC funds has decreased significantly over the past few decades. Recently, however, balanced funds have experienced a resurgence, garnering over 60 percent of VC in 2010 versus less than 40 percent just one year prior.