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Return to Venture Capital in the Aggregate


We measure the return to the aggregate portfolio of all equity investments (AE) in 17,242 ventures that had their rst funding round during 1980 and 2006. Our measure side steps the diculties involved in measuring the return from one funding round to the next and to exit of individual ventures that arise due biases in post money valuations pointed out in the literature, and will be of interest to policy makers and institutional investors. Since ventures take several years to return the money to investors through exit, we track these ventures till 2018. The AE portfolio earned an annualized internal rate of return (IRR) of 22%, signi cantly higher than the IRR of 7% on the portfolio that invested the money in each venture's industry index-portfolio instead. The Kaplan and Schoar (2005) Public Market Equivalent (PME) measure of performance is 1.42, i.e., each dollar invested returned 1.42 dollars after adjusting for risk and time value. A few ventures contributed to the superior performance. When the best 5% of the ventures are dropped from the aggregate venture portfolio, the risk adjusted return becomes negative. The AE portfolio performance, though superior, comes down after 1999. We use an imputation model following Hall and Woodward (2010) for addressing missing data issues, which we argue has more desirable properties than the re-sampling methods used in the literature.


Working Paper


Ravi Jagannathan, Shumiao Ouyang, Jiaheng Yu

Date Published



Jagannathan, Ravi, Shumiao Ouyang, and Jiaheng Yu. 2022. Return to Venture Capital in the Aggregate.


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