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Analyzing Venture Capital Performance - A data-driven look at 'unicorn' exits and VCs

Author: CB Insights
Date: May 2014

Startups that exit for more than $1 billion are a rarity. So are the VCs who invest in them. Here is the data.

Startups that exit for over $1 billion are a rarity. They’re so rare that folks have come up with nicknames to describe these rare beasts (unicorns and thunder lizards to name two). Since building a billion dollar company or unicorn is so hard and so rare, it naturally follows that identifying and investing in them is also pretty difficult. And the data on VC exits shows that there are, in fact, very few unicorn VCs.

While venture capitalists talk about wanting to identify and invest in billion dollar companies, the reality is that few VC investors actually do. Even when they do, very few are able to do it again highlighting the challenges that Ashby Monk of Stanford describes in his essay about bringing scale to venture capital. Moreover, for those who were astute enough to get into these big exits, getting in early is even rarer, highlighting the paucity of firms who can truly see around corners and who have access to truly superior dealflow.

As we work with Limited Partners, this is an area of increasing interest to them because performance persistence in venture capital is very real. In other words, in venture capital, it has been shown by studies that past performance actually is an indicator of future performance. Of course, performance persistence must be considered alongside other factors like network centrality and investment discipline and brand strength which have been shown to be indicators of VC performance as well. Combined, these factors create a Mosaic (note: only for LPs) which provides a holistic view into VC firm quality.

Geography: USA

Type of study: Consulting research

Relevant for: Limited partners, GP Venture capital, Fund of funds, Associate

Source: CB Insights