Measuring the performance of just one fund can be surprisingly difficult because venture capital is unique among asset classes.
It has the long periods of illiquidity of real estate without the predictable financial model. It’s easy to understand how rent prices and occupancy rates affect the financial performance of real estate assets. On the other side, venture capital also possesses the volatility of a penny stock portfolio without the luxury of real-time pricing and transparency of publicly traded securities. As we’ll see, it’s difficult to determine the value of a venture capital portfolio when its assets aren’t priced on an open market and there isn’t even a real consensus on how to value the assets.
It’s no wonder, then, that journalists, entrepreneurs, academic researchers, and even the investors themselves often make unforced errors when discussing venture returns and venture performance.
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