Benchmarking the Returns to Venture / Susan E. Woodward, Robert E. Hall.

Format:

Book

Author/Creator:

Woodward, Susan E.

Contributor:

National Bureau of Economic Research.

Hall, Robert E.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10202.

NBER working paper series no. w10202

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2004.

Summary:

We describe a new index of the current and historical returns to venture-type capital. The conceptual basis for the index is the value of a continuously reinvested value-weighted portfolio of all venture-backed and similar pre-public companies. It provides a metric for private equity comparable to the S&P 500 for public equity. We build the index from valuations revealed in episodic transactions in the companies' shares - private placements of new rounds of equity funding, IPOs, acquisitions, and liquidations. Our approach to dealing with the episodic nature of the data is similar to the one used in constructing indexes of real-estate value from transaction data for individual properties. We have extended earlier sources of data to deal with selection bias - we tracked down unfavorable valuations that were less likely to be reported in the earlier data. We also use econometric techniques to handle the remaining selection bias. The resulting index has important uses in marking venture portfolios to market and in assessing the performance of venture investments.

Notes:

Print version record

January 2004.