Return to Venture Capital in the Aggregate

Abstract

We examine the performance of the Aggregate Portfolio of All Equity Investments (APAEI) in 17,242 ventures with first funding round between 1980 and 2006 by following them till 2018, or their exits if earlier. The Gornall and Strebulaev (2020) upward bias in later-stage pre-money-valuations, while affecting all funding-round-to-exit returns, does not affect APAEI’s performance. APAEI had an internal rate of return of 22%, and a superior Generalized Public Market Equivalent of 1.44. When the best 5% of the ventures are dropped from the APAEI portfolio, the risk adjusted return becomes negative. The APAEI portfolio return declines after 1999. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.