Pitch Book Fall 2010 Returns Benchmark Report

The
Benchmarking
Report
PitchBook
Fall 2010
Private Equity | Venture Capital
Fund Returns | Fundraising | Capital Overhang

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Private Equity: Data | News | Analysis
COPYRIGHT © 2010 by PitchBook Data, Inc. All rights reserved. No part of this publication may be reproduced in any form or
by any means – graphic, electronic, or mechanical, including photocopying, recording, taping, and information storage and
retrieval systems – without the express written permission of PitchBook Data, Inc. Contents are based on information from
sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Nothing herein should be construed as
any past, current or future recommendation to buy or sell any security or an offer to sell, or a solicitation of an offer to buy any
security. This material does not purport to contain all of the information that a prospective investor may wish to consider and
is not to be relied upon as such or used in substitution for the exercise of independent judgment.
Private Equity & Venture Capital Overview .......................... 3-4
Average IRR by Vintage ................................................. 3
Private Equity & Venture Capital Horizon IRR ............... 4
Median 1-Year Returns by Fund Type ............................ 4
Private Equity ........................................................................ 5-8
Private Equity Horizon IRR ............................................. 5
1-Year Change in Total PE Portfolio Value ..................... 5
PE Fund Return Multiples by Vintage Year .................... 6
PE Fund Performance Quartiles by Fund Size ................ 6
Private Equity Fundraising ............................................. 7
Private Equity Fundraising Overhang ............................ 7
Selected Closed & Open PE Funds ................................. 8
Venture Capital ..................................................................... 9-12
Venture Capital Horizon IRR .......................................... 9
1-Year Change in Total VC Portfolio Value ..................... 9
VC Fund Return Multiples by Vintage Year .................... 10
VC Fund Performance Quartiles by Fund Size ................ 10
Venture Capital Fundraising Overhang .......................... 11
Selected Closed & Open VC Funds ................................. 12
Fund of Funds ........................................................................ 13
Global Private Equity & Venture Capital ................................ 14
About PitchBook..................................................................... 15
Table Of Contents

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Overview
Average IRR by Vintage Year
Despite a 24-month period that included the near collapse of the financial system, a complete freezing of debt markets and a
global recession second to only the Great Depression, the private equity and venture capital industries continue to
demonstrate their biggest strength of creating long term value in portfolio companies. The results of this value creation can be
clearly seen in the impressive returns generated by PE and VC investors across fund vintages, sizes, geographies and investment
strategies, as well as the continued commitment of capital from limited partners. Both PE and VC investors, however, continue
to face a number of near- and medium-term challenges, such as the need for investment liquidity opportunities and an
economy not far from its nadir. Other challenges are more structural, such as years of lackluster average returns for VC and a
significant capital overhang for PE.
This report contains detailed information on U.S. and global PE and VC fund IRRs, returns multiples, fund quartiles, fundraising
and capital overhang to provide a complete picture of each industry’s performance over the last decade. A number of
observations are apparent from the data, including the outperformance of public markets by PE, the even stronger
performance from global funds, the critical importance of fund selection and the effects of the overall economy on private
equity and venture capital returns.
Average IRR (net of fees) by vintage year & fund type. Funds newer than 2006 are not displayed since they
have yet to realize a significant portion of their investments (J-curve effect).
Private equity funds have had five straight vintages with IRRs averaging over 10%.
Mezzanine funds are the second best performers with returns not too far below PE funds
for most vintages followed by fund of funds which track close to the average IRR of all
fund types.
The average venture fund IRR has been negative for every vintage since 1999, bottoming
out with the 1999 vintage at -11.6% and peaking with the 2003 vintage at -3.4%.
Vintage Year
Source: PitchBook

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Private Equity & Venture Capital Horizon IRR
Median 1-Year Returns by Fund Type
The 1-, 3- and 5-year Horizon IRRs as of 3/31/2010 for private equity and venture capital are displayed in this chart along with
the 1-, 3- and 5-year annualized returns for public equities markets. The chart shows that over the last year the recent rise in
public markets has caused PE and VC funds to underperform the public markets. However, PE and VC funds are long-term
investors. Thus, a better measure of the industry’s performance is their 3- and 5-year returns, which show both PE and VC
outperforming the public market benchmarks. Private equity in particular outperforms with a 3-year IRR of 1.5% and a 5-year
IRR of 14% versus -6% and 0% returns for public markets over the same time periods.
The charting of 1-year returns over the last decade provides an interesting look at the performance of the industry in different
economic climates and across all parts of the business cycle. The impact of the recent financial crisis is clear with all funds,
except mezzanine, turning in a 1-year IRR for 2008/2009 of -18%. The middle of the decade, when the U.S. economy was
strong and expanding, provided an ideal environment for investors with five straight years of returns between 5% and 15.5%
for most fund types.
Median 1-Year Rolling Horizon IRR by Fund Type
Source: PitchBook
Sources: PitchBook
Russell Investments

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Private Equity
The early and mid-2000s were favorable years for private equity investing as displayed by its industry-leading average IRRs year
after year, impressive average return multiples and top quartile returns in excess of 17%. The past two years have been difficult
for PE though, with most portfolios taking significant writedowns as shown by below-par TVPI for most non-mature funds. But
with a 30.8% rise in PE portfolio values and a 14% 1-year IRR for the year ending 1Q 2010, performance is rebounding, signaling
that conditions are beginning to return to some state of normalcy. The data also shows that a nuber of key challenges remain
for PE, including finding liquidity opportunities, growing portfolio companies and putting to work the $485 billion of dry
powder amassed from fundraising over the last the last eight years.
Private Equity Horizon IRR
This graph shows the 1-, 3-, and 5-year Horizon
IRRs of PE funds by fund size as of 3/31/2010.
For the 12 months ending 3/31/2010, the
under $100M funds had the best 12 months
with an IRR of 20%. Looking longer term, a
better judge of actual PE fund performance,
the $100M to $250M bucket is leading
significantly with a 5-year horizon IRR of 21%
with the rest of the fund groups returning
around 14%. The effects of the financial crisis
on PE returns can clearly be seen with the
steep drop in 3-year returns for all fund types
from their 5-year return level.
1-Year Change in Total PE Portfolio Value
The value of the portfolios held by private
equity funds rose by 30.8% from 1Q 2009 to
1Q 2010 (represented by the yellow bars on
the right and left). The 30.8% increase can
be explained by a 28.6% rise in portfolio
valuations and a net increase in new
investment (investment minus exits) of
2.2%. Funds over $5 billion accounted for
70% of the total increase in value over the
past year (blue bars). This large increase
relative to the other fund sizes is likely due
to mega-funds’ reliance on public markets
for portfolio company valuations, which, as
shown on page 4, were up roughly 40%
during this time period.
Source: PitchBook
Source: PitchBook
Weighted Change in NAV by Fund Size
Starting
Value
Ending
Value
*For the unweighted analysis please contact PitchBook Research at research@pitchbook.com

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PE Fund Return Multiples by Vintage Year
PE Fund Performance Quartiles by Fund Size
This graph shows the distributed over paid-in (DPI), remaining value over paid-in (RVPI) and total value over paid-in (TVPI) of
private equity funds by vintage years as of 3/31/2010. Mature private equity funds are well into the positive; however, for the
1999–2002 vintages that are nearing the end of their fund lives, their ultimate return will be strongly affected by the exits of
their remaining portfolio companies (the red area in the graph). As would be expected, fund vintages 2005 and younger are
still in the process of investing and improving portfolio companies, so TVPI is at 1x or below with very little distributed back to
limited partners.
The 25th percentile, median and 75th percentile IRRs for mature (pre-2006) U.S. private equity funds by size. For example,
funds over $5 billion have a median return of 4.2% with a 25th percentile of -7% and a 75th percentile of 12.88%.
The data reveals a lack of variance between the IRR quartiles of different private equity fund sizes, suggesting that no single
fund size seems to significantly outperform or underperform the rest of the industry. The importance of fund manager
selection, however, is clearly illustrated by the spread between lower and upper quartile funds regardless of fund size. For
example, the lower quartile funds for the $100M to $250M size range have returns of below -4.3% versus the top quartile
funds which have IRRs of above 15.6%. Mature PE funds as a whole are strong performers with well over half of all funds
posting positive returns and half with returns of over 7.7%.
Source: PitchBook
Source: PitchBook
25th Percentile
Median
75th Percentile
J-Curve

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U.S. Private Equity Fundraising
U.S. Private Equity Fundraising Overhang
Fundraising since the third quarter of 2009 continued to trend upward with 22 funds totaling $32.5 billion closed during the
second quarter of 2010, rising from 21 funds totaling $21 billion closed during the first quarter. This trend is good news for the
PE industry as it shows a continued belief in the asset class and its long-term investment prospects from limited partners.
However, fundraising levels are still below the totals of recent years and will likely remain so for the near future as firms and
LPs digest the $777 billion that was raised by U.S. private equity funds from 2006 through 2008.
This graph shows the capital overhang of U.S. private equity funds by fund size and vintage year as of 3/31/2010. The U.S.
private equity dry powder is estimated to currently be $485 billion, $425 billion of which is attributable to funds raised since
the beginning of 2007. Funds above $1 billion comprise the largest portion of the overhang at 82% or $400 billion.
Middle-market focused funds have a much smaller capital overhang of roughly $85 billion, representing about 18% of the total
overall overhang. This PE capital overhang will likely continue to affect fundraising, investment and exits for years to come.
Source: PitchBook
Source: PitchBook

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Selected Funds Closed in 2010
Selected Funds Currently in Market
Fund
Madison Dearborn Capital Partners VI
Avista Capital Partners II
Resource Capital Fund V
Starwood Capital Global Hospitality Fund II
Sankaty Middle Market Opportunities Fund
Lovell Minnick Equity Partners III
AEA Mezzanine Fund II
Prospect Partners III
Argosy Investment Partners IV
The Azalea Fund III
Firm
Madison Dearborn Partners
Avista Capital Partners
Resource Capital Funds
Starwood Capital Group
Sankaty Advisors
Lovell Minnick Partners
AEA Investors
Prospect Partners
Argosy Capital
Azalea Capital
Fund Size ($M)
$4,100
$1,800
$1,000
$956
$900
$455
$420
$200
$180
$83
Fund
Mega-Funds:
Crestview Partners II
Trident V
Blum Strategic Partners IV
Middle-Market Funds:
Arlington Capital Partners II
Snow Phipps II
Forest Hill Partners
Thayer Hidden Creek Partners II
Lower-Middle Market Funds:
Alpine Investors Fund IV
Riverlake Equity Partners Fund II
Firm
Crestview Partners
Stone Point Capital
Blum Capital Partners
Arlington Capital Partners
Snow Phipps Group
Forest Hill Partners
Thayer Hidden Creek Partners
Alpine Investors
Riverlake Partners
Target Size ($M)
$2,500
$2,250
$1,500
$750
$700
$300
$250
$100
$100
Source: PitchBook
Source: PitchBook

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Venture Capital
Venture Capital Horizon IRR
1-Year Change in Total VC Portfolio Value
Venture capital investors and their portfolio companies have faced a number of challenges over the last 10 years, including a
shrinking pool of exit opportunities, a volatile business environment and an overabundance of capital. These and many other
issues have combined to result in a decade of stagnant returns averaging on the wrong side of 0%. The result has been a
decrease in investment in the industry compared to other alternative assets and increasing calls for venture investors to effect
fundamental changes in the way they do business. There are bright spots for venture capital however, including the 14% rise
in VC portfolio value this past year and the positive returns being generated by investors across a significant number of funds,
especially through upper quartile funds, which have returns well into the 15% range and higher.
The Horizon IRRs for venture capital funds
over the last 1, 3 and 5 years paints a
less-than-idyllic picture of average returns for
venture capital funds of all sizes. When
categorized by fund size and time period, the
average IRR for VC funds is at best 7% and at
worst -18%. Looking at the 5-year IRR is the
best measure of the industry’s performance
due to its long-term investment horizon, and
it shows that the average return is around
0%. The one outlier is the $500M-$1B fund
group, which at 3% is just above what the
public markets returned over the same time
period. The Horizon IRR is a useful guide for
gauging the interim progress of a fund
grouping, but only the end-of-life IRR
characterizes the true return.
Portfolio valuations for venture capital funds
rose over 14% for the 12 months ending
3/31/10 with the biggest contribution coming
from funds between $150 million and $250
million. The primary driver for this increase in
value is somewhat obscured behind
mark-to-market accounting, capital calls and
fund distributions, but, with resurgent public
markets and a dearth of both capital calls and
distributions, the change in NAV seems to be
largely attributable to rising valuations from
the public markets and portfolio company
growth. As deal flow returns over the coming
quarters, changes in portfolio value will
increasingly rely on the capital calls made by
the general partner.
Source: PitchBook
Source: PitchBook
Weighted Change in NAV by Fund Size
Starting
Value
Ending
Value
*For the unweighted analysis please contact PitchBook Research at research@pitchbook.com

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VC Fund Returns Multiples by Vintage Year
VC Fund Performance Quartiles by Fund Size
A look at the average TVPI, RVPI and DPI for venture capital funds by vintage year shows that the average VC fund for almost
all vintages is valued a bit below cost. The chart, however, clearly shows that VC funds are holding onto a signiﬁcant portion of
their portfolio as evidenced by the large fraction of RVPI (red portion of the bars) extending all the way back to the 2000
vintage. The lukewarm IPO and exit environment over the last few years has forced investors to retain their investments longer
than normal in hopes of better exit opportunities and valuations. Without these exits, it is still too early to pass judgment on
VC performance, since the majority of the last decade’s VC investments remain unrealized.
This chart shows that it is not all bad news for VC returns, as over half of all VC funds have positive IRRs and the
$150M-$250M fund group has the highest 75th percentile point of any PE or VC fund group at 20.4%. When looking at other
VC performance data, it is important to keep in mind that roughly half of all VC funds do have positive returns and that, as
this chart shows, the upper quartile funds usually have very strong returns. Additionally, this chart illustrates the importance
of fund selection, as the diﬀerence between the bottom and top quartile funds for VC is as much as 27 percentage points.
The 25th percentile, median and 75th percentile IRRs for mature (pre-2006) U.S. venture capital funds by size. For example,
funds over $1 billion have a median return of 1.56% with a 25th percentile of -4.5% and a 75th percentile of 2.89%.
Source: PitchBook
Source: PitchBook
25th Percentile
Median
75th Percentile
J-Curve

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U.S. Venture Capital Fundraising Overhang
U.S. Venture capital ﬁrms continue to hold $81.66 billion of dry powder in reserve, which is nearly 51% of the total capital
raised by VC funds since the beginning of 2003. 2003 and 2004 vintages are almost fully invested with just a small portion of
the capital reserved for follow-ons. 2005 and 2006 vintages also appear to have invested most of their capital, but these funds
have a larger store of dry powder for follow-on investments remaining. Funds sized between $500M and $1B have the largest
overhang at $25.2 billion, followed by funds sized between $250M and $500M with $24.6 billion.
Source: PitchBook

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Selected Funds Closed in 2010
Fund
New Enterprise Associates 13
Battery Ventures IX
Redpoint Ventures IV
Venrock Associates Fund VI
Draper Fisher Jurvetson Fund X
Founders Fund III
Greycroft II
Glynn Partners II
Alerion Investment Partners II
Early Stage Partners II
Firm
New Enterprise Associates
Battery Ventures
Redpoint Ventures
Venrock Associates
Draper Fisher Jurvetson
The Founders Fund
Greycroft Partners
Glynn Capital Management
Alerion Partners
Early Stage Partners
Fund Size ($M)
$2,500
$750
$400
$350
$350
$250
$130.7
$111
$70.7
$55
Source: PitchBook
Selected Funds Currently in Market
Fund
DAG Ventures IV
TPG Biotechnology Partners III
Polaris Venture Partners VI
Adams Capital Management IV
Onset Ventures VI
HLM Venture Partners III
NewSpring Healthcare II
SSM Partners IV
Prolog Fund III
Saratoga Ventures VI
Firm
DAG Ventures
TPG Ventures
Polaris Venture Partners
Adams Capital Management
ONSET Ventures
HLM Venture Partners
NewSpring Capital
SSM Partners
Prolog Ventures
Saratoga Ventures
Target Size ($M)
$600
$550
$400
$300
$250
$200
$150
$125
$50
$25
Source: PitchBook

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US Fund of Funds Return Multiples by Vintage Year
Private equity and venture capital fund of funds offer a number of benefits to their limited partners such as diversification,
access to top funds and professional fund selection and management. The data on U.S. fund of funds shows that they, on
average, tend to outperform venture capital funds but underperform private equity funds, yet their returns show a high
correlation to the movement of both venture and private equity. To see this, refer to the charts on pages 3 and 4 displaying
average IRR and rolling 1-year IRR. The two charts below provide a closer look at the performance data for fund of funds by
fund size and vintage year. All fund of fund strategies are aggregated together, including private equity, venture capital and
secondary.
Fund of fund multiples show strong returns for mature funds with average fund TVPI multiples all above 1x and as high as
1.42x. The RVPI for the mature vintages remains relatively high and, like PE and VC funds, a significant part of the final returns
will be dependent on the remaining exits in the underlying fund portfolios. Fund of funds still early in their lifecycle, though,
have an average TVPI that outperforms PE and VC funds for every vintage year since 2005.
Fund of Funds Horizon IRR
Looking at the 3- and 5-year performance, the
most notable trend to emerge is the
divergence in performance between funds
under $250M and over $5B (5-year return of
1%) from funds between $250M and $1B
(5-year return of 9%-14%). The 5-year return
for the two weakest fund sizes is close to the
public market returns shown on page 4, while
the $500M to $1B fund group’s Horizon IRR of
14% is equal to the average 5-year return for
the top PE fund size groups shown on page 5.
Fund of Funds
Source: PitchBook
Source: PitchBook

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The charts below display performance multiples (TVPI, RVPI and DPI) for private equity and venture capital funds primarily
investing in companies located outside of the United States. The TVPI multiple for global funds reveals that they are actually
outperforming U.S.-focused funds for 5 of the mature PE vintages and 6 of the mature VC vintages since 1998. Looking closer
at this outperformance reveals that for these vintage years global PE funds average a .25x higher return and for VC the return
is closer to 0.5x higher. For every single vintage year from 1998 through 2004, global PE and VC funds also have a higher DPI
ratio, meaning they have distributed a higher portion of their portfolio back to their LPs than U.S. funds. Conversely, for
younger funds (2006-2010), global partnerships are underperforming U.S.-focused funds across nearly every vintage for both
PE and VC.
Global Private Equity
Global PE Fund Multiples by Vintage Year
Global VC Fund Multiples by Vintage Years
Source: PitchBook
Mature global private equity funds are
returning more than their U.S. counterparts
with an average TVPI of 1.6x, RVPI of 0.4x and
DVPI of 1.2x. The 2001 vintage was
particularly impressive with a TVPI of 2.41x,
making it the highest returning vintage for
both U.S. and global PE and VC funds. Global
funds are also outperforming U.S. funds in
terms of their much higher ratio of distributed
value as compared to total value. Global funds
also begin to realize investments and
distribute returns nearly a year earlier than
their American counterparts.
Source: PitchBook
Global venture capital funds are currently
performing better than U.S. VC funds for all
mature vintages with an average TVPI of
1.25x, RVPI of 0.6x and a DPI of 0.65x. The
1999 and 2002 fund vintages are doing
especially well with an average TVPI of 1.63x.
Global VC funds are slower to exit than global
PE funds but do appear to be slightly faster
than their U.S. VC counterparts. For mature
global VC funds, like U.S. VC funds, their
relatively high RVPI ratio shows a signiﬁcant
amount of value still being held in portfolios
J-Curve
J-Curve

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