Venture capital saw record year in 2019, says eFront

Venture capital

Venture capital funds delivered exceptional performance in 2019 globally, which continued in Q1 2020 unscarred by the unfolding Covid-19 crisis, according to eFront’s latest Quarterly Private Equity Performance report.

The research showed that 2019 was an extraordinary year for venture capital performance, with funds globally recording an increase in TVPI of 10.5 per cent year on year, reaching 1.632x in Q4 2019 - which is a record high.

2019 globally recorded an increase in aggregate multiple of invested capital, rising from 1.478x in Q4 2018 to 1.632x in Q4 2019.

Risk decreased, meanwhile, with the TVPI spread between best and worst performing funds falling to 1.721x in Q1 2020 - down from 1.932x in Q3 2019.

Average time-to-liquidity stabilised in 2019 at around 3.5 years, but the challenging conditions of 2020 are expected to highlight the trend of longer holding periods. In terms of geography, the US drove the global progression of TVPIs, while the performance of Western European funds remained subdued.

Active venture funds have capitalised on favourable macroeconomic conditions and mirrored the uptick of listed stock prices. This represents the first time that the TVPI of active venture capital funds has broken the 1.6x threshold, setting another record high.

Despite the outbreak of the Covid-19 pandemic and subsequent economic crisis, Q1 2020 consolidated this position. e-front believes that it is possible that Q4 2019 therefore marked a peak, with 2019 and 2020 so far sitting clearly above the average multiple over ten years, breaking out from a relatively long period of stability. This deviation from the average will be tested by the events unfolding in 2020, said the financial software provider.

The efront data also showed that vintage year 2012 stands out as the best performer in recent years in both the US and Western Europe, with a TVPI of more than 2x in both geographies.