NEW YORK, June 2, 2011 (GLOBE NEWSWIRE) -- The estimated market value of venture capital-financed companies in the U.S. rose 19% in 2010's fourth quarter and 23% for 2010, according to the Dow Jones U.S. Venture Capital Index. The index's performance topped the Dow Jones U.S. Total Stock Market Index 's gains of 12% and 17%, respectively, over the same time periods.
The rise in the Dow Jones U.S. Venture Capital Index for 2010 (based on back-testing) marks the second consecutive year in which valuations of, and the amounts invested in, venture capital-financed companies posted gains over to previous years.
Venture capitalists invested $28.5 billion in 2,874 deals in 2010, an increase of 17% in dollars and 8% in deals compared with 2009, according to Dow Jones VentureSource. For 2010's fourth quarter, investments totaled $9.0 billion in 785 deals, a 20% increase in dollars and no change in deals from the fourth quarter of 2009 when $7.2 billion went into 785 deals, according to Dow Jones VentureSource.
"Anyone who thinks the rise in valuations of venture capital-funded companies in 2010's fourth quarter was dominated by a handful of companies would be mistaken," said Susan Woodward, an economist and the founder of Sand Hill Econometrics. "There were 785 private rounds of funding in the fourth quarter with an average amount of $11.5 million raised, well above the third quarter's $9.0 million. These latest figures validate the notion that valuations of venture capital- funded companies for 2010's fourth quarter were up significantly."
The Dow Jones U.S. Venture Capital Index was launched on September 30, 2010 by Dow Jones Indexes, a leading global provider of indexes such as the Dow Jones Industrial Average. The methodology for the Dow Jones U.S. Venture Capital Index was developed by Sand Hill Econometrics together with Dow Jones Indexes. The values are based on a combination of values reported by the individual venture capital-funded companies to Dow Jones VentureSource and value estimates.
Sand Hill previously developed econometric methods for estimating company values when a recent market value is not readily available. Dow Jones VentureSource database is owned by Dow Jones & Company, Inc.
The Dow Jones U.S. Venture Capital Index is based on U.S. domiciled companies in the Dow Jones VentureSource database, the world's most comprehensive venture capital database. VentureSource tracks more than 19,000 investment firms and approximately 27,000 venture-backed companies -- in all industries and stages of development.
The index tracks the value of companies headquartered in the U.S. that have received equity funding from institutional venture capital funds. Values are reported by the companies themselves. Excluded from the index are companies that receive funding solely from "angels," affluent private investors, or leveraged buyout funds. Component companies enter the index when they get a first round of venture funding. They exit the index when they are acquired, merge with another company, make an IPO or go out of business. The index is market-value weighted, continuously invested, and updated quarterly.
As of December 31, 2010, there were about 8,000 active companies in the Dow Jones U.S. Venture Capital Index. The Index, first published on March 31, 2010, has an annualized return of 16.4% from the end of 1991 through the present, before expenses and fees. Back-tested monthly index history is available back to December 31, 1991.
The Dow Jones U.S. Venture Capital Index is calculated in U.S. dollars and published quarterly, because funding events are usually reported at the end of calendar quarters, on a one-quarter delayed basis. Index values for intervening months also will be published quarterly.
The Dow Jones U.S. Venture Capital Index has been licensed to Chicago Alternative Investment Partners, LLC to serve as a basis for financial products.
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"Dow Jones®", "Dow Jones Indexes" and "Dow Jones Venture Capital Indexes" are service marks of Dow Jones Trademark Holdings LLC ("Dow Jones"), and have been licensed for use by CME Group Index Services LLC ("CME Indexes"). Investment products based on the Dow Jones Venture Capital Indexes are not sponsored, endorsed, sold or promoted by Dow Jones, CME Indexes or their respective affiliates and none of Dow Jones, CME Indexes and their respective affiliates make any representation regarding the advisability of investing in such products. Inclusion of a company in any of the Dow Jones Venture Capital Indexes does not in any way reflect an opinion of Dow Jones, CME Indexes or any of their respective affiliates on the investment merits of such company. None of Dow Jones, CME Indexes or any of their respective affiliates is providing investment advice in connection with these indexes.
The Dow Jones U.S. Venture Capital Index values have been revised from previous published values. These are normal, ongoing revisions that occur when previously unreported transactions become known.
The Dow Jones U.S. Venture Capital Index was first published on March 31, 2010. All estimated daily historical closing prices prior to that date are based on back-testing (i.e., calculations of how the index might have performed in the past if it had existed). Back tested performance information is purely hypothetical and is solely for informational purposes. Back tested performance does not represent actual performance, and past performance is not indicative of future results.
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