Venture Returns Ratio Hits 10 Year High In 2012

Thanks in part to the Facebook IPO, venture investors in 2012 saw their best return on invested capital in a decade.

A steady rise in the ratio of portfolio company exit size to capital raised continued through the year, climbing to a four-year peak of 4.7 times invested capital, Pitchbook has found. The increase suggests a broad improvement in investment performance.

After falling in 2009 to a low of 1.4 times invested capital, the ratio advanced to 3.4x in 2010 and 4.1x in 2011, according to the Pitchbook study.

While Facebook’s $16 billion IPO can claim some of the credit, so can a large handful of enterprise-focused public offerings. Enterprise software companies accounted for 40% of last year’s 47 venture-funded deals, and companies such as Splunk, Guidewire, Workday and ServiceNow were big winners.

The study found the ratio of exit size to total capital raised was 3.5x in 2007, prior to the financial crisis.

According to Pitchbook, last year’s 10 largest exits were:

  • Facebook’s $16 billon IPO
  • Nicira Network’s $1.26 billion acquisition;
  • Yammer’s $1.2 billion acquisition;
  • Meraki’s $1.2 billion acquisition;
  • Workday’s $733 million IPO;
  • Instagram’s $715 million acquisition;
  • Buddy Media’s $689 million acquisition;
  • EmbanetCompass’ $650 million acquisition;
  • U.S. Renal Care’s $565 million buyout; and
  • Extend Health’s $435 million acquisition.

A Pitchbook chart showing the invested capital ratio is below.


Photo courtesy of Shutterstock.


  • I’m not sure how helpful these data are. In fact, they may be unhelpful because they suggest that venture returns are substantially improving, but they don’t provide any real evidence of that. Just because a company had a huge IPO or was sold for more than $1 billion doesn’t mean the VCs made money. For example, very early investors in Facebook (e.g. Accel Partners) made a fortune, but those who piled in at the end (e.g. Kleiner Perkins) didn’t make much at all on the IPO.

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