Does GDP growth influence the performance of venture capital funds?

eFrontDoes GDP growth influence the performance of venture capital funds?

Mar

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March 2 , 2017 | Posted by eFront Solutions |

Does GDP growth influence the performance of venture capital funds?

The ancillary benefits of venture capital on long-term economic growth have been much advertised, but there is a related question of arguably greater importance to limited partners. What is the effect of GDP on the performance of individual venture capital funds?

As with venture capital’s effect on the economy, the easy and intuitive answer does not tell the whole story. For instance, our analysis of Pevara data shows that a rising economic tide does not lift all venture capital funds equally.

While our analysis is far from conclusive (we look at 490 US funds over 7 vintage years), it suggests that the well-rehearsed hypothesis of venture capital driving economic growth has an equally interesting and complex converse hypothesis.

As ever, should you have any comments on our analysis or questions regarding Pevara, please don’t hesitate to get in touch.

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