eFront: VC return multiples touch record high in Q4 2018

July 24, 2019 | Venture Capital
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Globally, venture capital (VC) funds shone with a return of 1.531X in the last quarter of 2018

According to eFront’s latest Quarterly Private Equity Performance Returns report, 2018 was a landmark year for VC performance. A favourable exit environment enabled VC funds to cash out in shorter time frames with high returns and low risk.

2018 a bumper year for VC

VC funds ended on a high note in 2018, their best year ever, clocking a positive performance of 1.531X, as measured by the multiples on invested capital (TVPI) yardstick.

Period to cash in, as measured by the Time to Liquidity metric, sat at 3.3 years – continuing the downtrend that began in 2015.

VCs evaluate risk by calculating the dispersion of returns between the top and bottom 5% of performance. Though this measure spiked higher in 2018, it nevertheless came within the average seen during the last five years.

Europe doing better than US

“These high last-quarter returns remain associated with comparatively low risk and shorter time-to-liquidity, as VC funds capitalise on a favourable exit environment,” said Tarek Chouman, CEO, eFront. “This global data masks a clear geographical divergence, as US funds registered a rather muted performance, while Western European VCs consolidated their outperformance, pointing to a potential renaissance for European venture capital funds.”

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