This report analyses the performance results of the venture capital funds in relation to the operational characteristics of the domestic venture capital firms, such as status of investment target concentration, track records, corporate governance structure.
Although investment results have been analyzed restrictive to the survey method research samples suggested by the previous research; in this report, IRR(Internal Rate of Return) have been calculated based on the actual exit results of the 318 venture capital funds that have been liquidated between 1999～2007.
Actual results of the analysis are as follows.
First, corporate governance structure of the venture capital firms can be classified into individual-type, industry-type finance-type. The performance results of the individual-type venture capital funds showed low returns than others group, but then the performance results of finance-type venture capital funds achieved the highest returns. This research results was different of the previous research; The performance results of industry-type venture capital funds was better than finance-type venture capital funds.
Second, there is a difference in the investment results between venture capital funds operated by an established venture capital firm versus newly established venture capital firm at the time of the venture capital fund set up. The venture capital funds operated by an established venture capital firm had higher returns than the newly established venture capital firm.
Third, within the venture capital funds that are operated by the venture capital firms, there is a difference in the results achieved by a ‘professional venture capital funds’ that focus on start-up companies or specific regions/industries versus a ‘general venture capital fund’ that does not focus on any specifics. It was proved that “general venture capital funds” generate higher rate of return according to the natural portfolio diversification.
In addition, it was shown that financial results, exit timing, investment target concentration, track-record of the venture capital firm at the time of fund establishment are critical aspects which contribute to the profitability of the funds.
It is expected that such findings evident in this report will be of a critical usage to the development of venture capital funds benchmark venture capital investment index that can assist in making investment decisions of the venture capital investors.