Size Matters (at least for venture funds)
I've previously written several blog posts about venture capital fund size -- and how it impacts fund performance. I just came across a report that Silicon Valley Bank wrote last month which had some amazing data on fund-size and performance.
While I would recommend that you download and read the entire report, I think that the chart below tells a powerful story. Specifically:
If you were to look at the performance of large funds (those greater than or equal to the vintage year median size) for venture funds between 1983 and 2003, just 2% of the large funds returned more than 2x contributed capital. And 92% of the funds returned less than 1.5x capital. But if you were to look at the performance of the small funds (those less than the vintage year median size) for those same years, the performance is much better. Indeed, 48% of those funds returned 2x -- or, put another way, small funds were 24 times more likely to produce returns above 2x than large funds. And just 36% of small funds returned less than 1.5x capital. Wow. And this is not some small sample -- the SVB study included the returns of more than 850 venture firms...