This performance downturn began in the spring of 2000 after a hard dose of reality in the Christmas season of 1999 for on-line retailers, many of whom had venture capital financing. The PEPD tracks the performance of over 1,200 US venture capital and buyout funds formed since 1969 and over 425 European private equity funds formed since 1980.
Returns are net to investors after fees and carried interest.
What we may see in the next few months is a shift by institutional investors from heavily weighted venture commitments to buyout and other private equity commitments. This is not seen as a move to abandon venture investing but rather to balance their private equity portfolios in light of the large amount of change in asset values across all asset sectors. Public investors forget that the companies that have been having problems in the public markets today are investments that venture investors made two to four years ago. They have since modified their investment philosophy and have changed the focus of their investments over the past 18 months to reflect current conditions. The companies they invest in today are the companies that will go public in the next two to three years, and it will be a while before we see what the real impact of the downturn in technology and Internet performance will bring to the venture world.