FIN 500 Washington University Venture Capital Questions
- National Venture Capital Association (“NVCA”) 2020 Yearbook, pages 5-28, 34-37.
- CalPERS Private Equity Fees $3.4 Billion (from Wall Street Journal)
- Inside CalPERS Direct (from Chief Investment Officer)
- Lower VC Returns on Horizon (from Pensions & Investments)
- Cambridge Associates Q1 2020 US Venture Capital Return Benchmarks, pages 6-7.
- Now What? (from Pitchbook Private Market Playbook Q2 2020)
After reading the required readings, use those materials and your own knowledge to answer the following questions.
Please be concise in your responses, focusing on key facts and interpretations rather than repeating extensive contents of the readings. The maximum length of your entire response is limited to one page of 12-point text double-spaced. (It is not necessary to repeat the questions in your response.)
- Of statements (A) and (B) below, which are you more inclined to agree with? Why? What evidence supports your position?(A) “Compared to the most relevant benchmark, the NASDAQ Composite, Cambridge Associates finds that venture capital has either underperformed or only minutely outperformed the benchmark over the last 5, 10, 15 and 20 years. I see no reason to commit capital to risky, illiquid assets that fails to outperform the public markets.”(B) “Cambridge Associates finds that venture capital has substantially overperformed all the comparable public-market indices over a twenty-five year window, the longest provided, by increments ranging from 25-28% depending upon the specific index chosen. I expect venture capital to continue to overperform public markets in the future, consistent with the weight of historical experience.”
- How do you anticipate that the VC industry will be impacted by the ongoing COVID-19 crisis? You may wish to consider elements including the ability to raise capital for new venture funds, the ability to identify and adequately capitalize new portfolio company investments, the management of existing portfolio companies, and the ability to exit existing portfolio company investments.