Return to Venture Capital in the Aggregate

64 Pages Posted: 17 Aug 2020 Last revised: 27 Feb 2023

See all articles by Shumiao Ouyang

Shumiao Ouyang

University of Oxford, Saïd Business School

Jiaheng Yu

The University of Hong Kong - Faculty of Business and Economics

Ravi Jagannathan

Northwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER); Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF); Indian School of Business (ISB), Hyderabad

Multiple version iconThere are 2 versions of this paper

Date Written: August 2020

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.

Suggested Citation

Ouyang, Shumiao and Yu, Jiaheng and Jagannathan, Ravi, Return to Venture Capital in the Aggregate (August 2020). NBER Working Paper No. w27690, Available at SSRN: https://ssrn.com/abstract=3675242

Shumiao Ouyang (Contact Author)

University of Oxford, Saïd Business School ( email )

HOME PAGE: http://https://www.shumiaoouyang.com/

Jiaheng Yu

The University of Hong Kong - Faculty of Business and Economics ( email )

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Hong Kong
China

Ravi Jagannathan

Northwestern University - Kellogg School of Management ( email )

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National Bureau of Economic Research (NBER)

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Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF) ( email )

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Indian School of Business (ISB), Hyderabad ( email )

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India

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