Thursday, August 03, 2006

Venture Capitalists.. Rethink your idea model..

I wish I could talk more about it. Since the industry is getting heated up and I sincerely Belive that many people play VC for pursuing the passion I dont know how many players are in for money. I am sure of one thing that we can easily distinguish them any way. Thanks Paul and Wall Street Journal

Venture-capital returns are hard to gauge, partly because of the difficulty of putting a value on small, private companies. Cumulative returns for the past six years remain negative, still smarting from the dot-com meltdown. Though they have recovered since then, they are still well below the yearly levels of the mid- to late 1990s, when they sometimes exceeded 50%.

Last year U.S. venture capitalists posted a mean return, including realized and unrealized gains, of 7.9%, according to research firm Cambridge Associates. For the year ended March 31, returns were 13.8%, barely beating the 11.7% gain of the Standard & Poor's 500-stock index.

Investors generally expect outsize returns from venture capital, to compensate for the high risk of investing in start-ups and the lack of liquidity. They can't pull cash out of venture funds as easily as out of stocks or mutual funds.