Dialing Down: Venture Capital Returns to Smaller Size Funds

Do small venture capital funds outperform large venture capital funds?

SVB Capital is interested in understanding this issue and the many dynamics necessary for a healthy venture capital industry. Median fund sizes in venture capital have declined dramatically in recent years, and many limited partners have liquidity constraints that have caused them to reduce or pull back from allocations to the asset class. At the same time, many general partners realized little to no carry (profit participation) over the past decade. Lastly, realized and unrealized returns for venture capital funds over the past ten years have been disappointing. These ongoing developments have posed fundraising challenges for the surviving firms and are gradually leading to a compression in overall fund sizes.

We believe the decline in fund sizes is a healthy trend for the industry.

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