Dow Jones Indexes, an index provider and CME Group company, has launched the Dow Jones US Venture Capital Index, designed to measure changes in the market value of venture capital-financed companies in the US.
The index has been licensed to Chicago Alternative Investment Partners to serve as a basis for financial products.
"This index tracks an asset class that has not been readily available before to the general public," says Michael A. Petronella, president, Dow Jones Indexes. "By publishing this index, we intend to shed light on this dynamic market and offer investors access to information in this important segment of US economic growth.”
The methodology for the index was developed by Dow Jones Indexes together with Sand Hill Econometrics. The values are based on a combination of values reported to Dow Jones VentureSource and value estimates based on Sand Hill’s previously developed econometric methods for estimating company values when a recent market value is not readily available.
The selection universe for the index is based on companies in the Dow Jones VentureSource database, which tracks more than 14,000 private investment firms and more than 48,000 venture-backed companies in all industries and stages of development. The index is based on data from Dow Jones VentureSource, about companies headquartered in the US that have received equity funding from institutional venture capital funds. Excluded from the index are companies that receive funding solely from angels, affluent private investors, or leveraged buyout funds.
"Even as we began building a venture index in 2001, I knew it was important to collaborate with a big-name index provider and to use a source with high quality data. Dow Jones Indexes and the Dow Jones VentureSource database were the first, obvious, and ultimate choices," says Susan Woodward, an economist and the founder of Sand Hill Econometrics. "It’s a great time to launch. We look forward to coming out with additional indexes built from this data.”
Component companies enter the index when they get a first round of venture funding. They are removed from the index when they are acquired, merge with another company, make an initial public offering or go out of business. The index is market-value weighted and will be reviewed quarterly.
As of 31 March, there were more than 7,000 components in the Dow Jones US Venture Capital Index.
