A gradually recovering exit market helped drive shorter-term venture capital performance upward in the first quarter of 2010 while the ten-year horizon continued to decline, according to the Cambridge Associates US Venture Capital Index, the performance benchmark of the National Venture Capital Association.

Certain time horizons saw an increase in returns from the previous quarter, reflecting the opening of the IPO window and a record level of merger and acquisition activity in the quarter.

However, the improvement was not enough to bolster the ten-year returns which continue to deteriorate as the calculation for this time horizon no longer includes the high performing 1999 calendar year.

"An improving exit market translates into distributions back to limited partners, a dynamic the venture industry as a whole has not enjoyed since the financial crisis began in 2008," says Mark Heesen (pictured), president of the NVCA. "Top firms continue to perform well above the index but that band has narrowed over the last several years, fostering the Darwinian environment in which the venture industry is operating. We will need several quarters of healthy and viable IPOs and M&As to widen that pool of top performers and move returns back to the historical levels expected by our investors."

Peter D. Mooradian of Cambridge Associates adds: "We continue to see a decline in the 10-year return number but believe it will bottom-out in the mid-negative single digits over the next two quarters. Sustained improvement in the exit markets should result in the figure returning to breakeven or modestly positive territory in the second half of 2011."