TY  - JOUR
AU  - Woodward,Susan E.
AU  - Hall,Robert E.
TI  - Benchmarking the Returns to Venture
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10202
PY  - 2004
Y2  - January 2004
UR  - http://www.nber.org/papers/w10202
L1  - http://www.nber.org/papers/w10202.pdf
N1  - Author contact info:
Susan E. Woodward
Sand Hill Econometrics, Inc
115 Everett Ave.
Palo Alto, CA 94301
E-Mail: swoodward@sandhillecon.com

Robert E. Hall
Hoover Institution
Stanford University
Stanford, CA  94305-6010
Tel: 650/723-2215
E-Mail: rehall@gmail.com
AB  - We describe a new index of the current and historical returns to venture-type capital. The conceptual basis for the index is the value of a continuously reinvested value-weighted portfolio of all venture-backed and similar pre-public companies. It provides a metric for private equity comparable to the S&P 500 for public equity. We build the index from valuations revealed in episodic transactions in the companies' shares - private placements of new rounds of equity funding, IPOs, acquisitions, and liquidations. Our approach to dealing with the episodic nature of the data is similar to the one used in constructing indexes of real-estate value from transaction data for individual properties. We have extended earlier sources of data to deal with selection bias - we tracked down unfavorable valuations that were less likely to be reported in the earlier data. We also use econometric techniques to handle the remaining selection bias. The resulting index has important uses in marking venture portfolios to market and in assessing the performance of venture investments.
ER  -