Private equity performance improved in Q4 2003, with venture capital returning 8% for the first time in three years and total private equity returning 18.3%. Performance has strengthened as exit markets like IPOs and acquisitions have improved, stabilizing private company valuations. While returns are recovering, performance remains below historical norms and continued strengthening of exit markets is needed for full recovery. Long-term venture capital returns over 5, 10, and 20 years have consistently outperformed public markets.

1. Jeanne Metzger, NVCA, 703-524-2549 ext. 116, jmetzger@nvca.org
Jesse Reyes, Thomson Venture Economics, 212-806-3148, jesse.reyes@thomson.com
Private Equity Performance Continued To Improve in Q4 2003
Short-term Venture Capital Performance Reached Positive Territory at Year End
April 21, 2004 – New York, NY - According to Thomson Venture Economics and the National
Venture Capital Association, fourth quarter 2003 posted a positive venture capital one-year
return, 8%, for the first time in three years. The total private equity asset class (venture capital,
buyouts and mezzanine funds) posted a strong 18.3% performance in the fourth quarter
representing the second consecutive positive quarter for the asset class. After three years of
negative returns and a challenging market, private equity performance is showing signs of
stability.
Private equity performance has improved because the exit markets, the IPO market and the
acquisition market, have strengthened in recent quarters. In addition, private company valuations
have stabilized and in some sectors improved. The last few years have been difficult for the
private equity and entrepreneurial communities with the IPO market virtually closed and the
recession making it difficult for established companies to buy new technology and make
acquisitions.
According to Jesse Reyes, Vice President at Thomson Venture Economics, quot;These results are
probably some indication that spring may have finally arrived for the US private equity industry
with three consecutive quarters of positive performance after two and one half years of decreases.
Given that these are year-end results for 2003, they are validated by the increases in the
technology public markets through much of last year. There is reason to think that continued
increases are sustainable especially if the IPO and M&A exit markets continue to improve this
year. While a small part of some of the increase can be attributed to improved valuations in
existing portfolio companies, the majority of the increase is the result of distributions to limited
partners. This has to be positive news for funds going back to the limited partner community for
new fund commitments.quot;
Mark Heesen, President of the National Venture Capital Association commented, “The outlook
for the future is becoming increasingly positive although significant improvement is still needed.
The number of venture-backed IPOs and the values of venture-backed acquisitions still remains
low compared to historical norms. We hope that IT spending continues to increase and that the
markets remain stable. If so, performance will inevitably bounce back.”
The gateway into the equity markets has allowed general partners to realize returns on past
investments, which has increased distributions back to limited partners. Without the equity
markets or acquisitions, general partners have little to no opportunity to create value for their
limited partners. The five-year and ten-year venture capital returns are still a strong indicator that
venture capital remains strong. Venture capital performance over the long term has continually

2. outperformed the public markets respectively at five-years with 22.8%, ten-years at 25.4%, and
twenty-years at 15.5%
Venture Economics' US Private Equity Performance Index (PEPI)
Investment Horizon Performance through 12/31/2003
Fund Type 1 Yr 3 Yr 5 Yr 10 Yr 20 Yr
Early/Seed VC -7.0 -23.3 54.9 37.0 19.1
Balanced VC 11.0 -13.9 19.4 20.4 13.3
Later Stage VC 25.4 -18.8 3.5 17.0 13.8
All Venture 8.10 -18.9 22.8 25.4 15.5
All Buyouts 24.1 -2.1 2.2 7.8 12.4
Mezzanine 5.7 1.1 5.6 7.3 9.6
All Private Equity 18.3 -7.0 6.8 12.7 13.6
NASDAQ 50.0 -6.7 -1.8 9.9 12.4
S & P 500 26.4 -5.6 -2.0 9.1 12.9
Source: Thomson Venture Economics/National Venture Capital Association
*The Private Equity Performance Index is based on the latest quarterly statistics from Thomson Venture Economics’ Private Equity
Performance Database analyzing the cashflows and returns for over 1750 US venture capital and private equity partnerships with a
capitalization of $585 billion. Sources are financial documents and schedules from Limited Partners investors and General Partners.
All returns are calculated by Thomson Venture Economics from the underlying financial cashflows. Returns are net to investors after
management fees and carried interest.
Investment Benchmark Series:
In addition to these publicly reported quarterly results, a more comprehensive analysis on fund
performance can be found in Thomson Venture Economic’s Investment Benchmark Series, The
2003 Investment Benchmarks Report: Venture Capital and 2003 Investment Benchmarks Report:
Buyouts and Other Private Equity. The IBR:VC has over 1,000 partnerships formed from 1969 to
2002 representing over 400 firms while the IBR:Buyouts has 550 partnerships formed from 1976
to 2002 representing over 270 firms. Performance statistics are provided by vintage year (year of
fund formation), by composite portfolio (multiple vintage years) and by time horizons (1,3,5,
years...) analyzed by stage, fund size and sequence. Also, both publications provide correlation
analysis to indicate how the private equity asset classes interact with other types of equity and
debt investments. For more information, please contact Rob Mills at 646-822-3045.
Thomson Venture Economics, a Thomson Financial company, is the foremost information
provider for equity professionals worldwide. Venture Economics offers an unparalleled range of
products from directories to conferences, journals, newsletters, research reports, and the Venture
Expert™ database. For over 35 years, Venture Economics has been tracking the venture capital
and buyouts industry. Since 1961, it has been a recognized source for comprehensive analysis of
investment activity and performance of the private equity industry. Venture Economics maintains
a long-standing relationship within the private equity investment community, in-depth industry
knowledge, and proprietary research techniques. Private equity managers and institutional
investors alike consider Venture Economics information to be the industry standard. For more
information about Venture Economics, please visit www.ventureeconomics.com.
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The National Venture Capital Association (NVCA) represents approximately 450 venture
capital and private equity organizations. NVCA's mission is to foster the understanding of the
importance of venture capital to the vitality of the U.S. and global economies, to stimulate the
flow of equity capital to emerging growth companies by representing the public policy interests
of the venture capital and private equity communities at all levels of government, to maintain
high professional standards, facilitate networking opportunities and to provide research data and
professional development for its members. For more information visit www.nvca.org.
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