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The estimated market value of venture capital-financed companies in the U.S. rose 10.1% in 2011’s first quarter from the end of 2010, according to the Dow Jones U.S. Venture Capital Index. The index’s performance topped the Dow Jones U.S. Total Stock Market Index’s total return gain of 6.4% over the same time period.
The return on the Dow Jones U.S. Venture Capital index for the 12-month period ended March 2011 was 32.7%. The largest gains for the quarter and year ended in March 2011 were in software companies.
Venture capitalists invested an estimated $6.5 billion in 661 deals in the first quarter of 2011, a decrease of 23% in dollars and 14% in deals compared with the fourth quarter of 2010, according to Dow Jones VentureSource.
“With the financial markets zig-zagging for most of the year, a 10% gain in the market value of venture capital-financed companies in the U.S. for the first quarter of 2011 is impressive,” said Jamie Farmer, Executive Director, Global Business Development and Communications, Dow Jones Indexes. “As the only venture capital index to track the estimated value of VC-financed companies rather than VC-fund performance, the Dow Jones U.S. Venture Capital Index can provide valuable market insight that’s difficult to find anywhere else.”
The Dow Jones U.S. Venture Capital Index was launched on September 30, 2010, by Dow Jones Indexes, a leading global provider of indexes such as the Dow Jones Industrial Average.
The methodology for the Dow Jones U.S. Venture Capital Index was developed by Sand Hill Econometrics together with Dow Jones Indexes. It is based on a combination of estimated company values (utilizing econometric methods when market values are not readily available) and valuations reported by individual venture capital-funded companies to Dow Jones VentureSource.
The Dow Jones U.S. Venture Capital Index is based on U.S. domiciled companies in the Dow Jones VentureSource database (owned by Dow Jones & Company, Inc.), the world’s most comprehensive venture capital database. VentureSource tracks more than 5,000 investment firms and approximately 27,000 venture-backed companies -- in all industries and stages of development.
The index tracks the value of companies headquartered in the U.S. 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. Component companies enter the index when they get a first round of venture funding and exit the index when they are acquired, merge with another company, make an IPO, or go out of business. This rules-based index is market-value weighted and continuously invested. It is calculated in U.S. dollars and published quarterly because funding events are typically reported at the end of calendar quarters, on a one-quarter delayed basis. Index values for intervening months are also made available quarterly.
As of March 31, 2011, there were about 7,800 active companies in the Dow Jones U.S. Venture Capital Index. The index, first published on March 31, 2010, has an annualized return of 17.4% (before expenses and fees) from the end of 1991 through the present, based upon back-tested monthly index history available to December 31, 1991.
