Guest lecturer at the IVA conference, Conor F. Kehoe, a London based
partner in McKinsey & Company, presented some of the findings from a
new study, as yet unpublished, that analyzes the performance of the
venture capital industry. As to the overall performance of venture
capital companies as investment vehicles, the report concludes that
the return on investment was "pedestrian and mediocre" for most of
the industry with 16% in annual returns over 20 years. However, the
returns of the past three years, the "big years" were in the order of
34%. The "big winners" in performance were in the top quartile group
that averaged 38% return over the long term. The most startling
finding of the study was that the companies appearing in the top
quartile were consistent in their high performance, which was driven
by "star deals".
The performance of the industry in terms of disbursement and fund
raising, is cyclical and closely correlates with the performance of
the overall economy.
The prestigious consulting firm McKinsey & Company has a long record
of studies of business phenomena. In 1983, McKinsey completed a two
year study of a selection of America's most successful middle size
companies. The report stunned the corporate world by challenging
conventional wisdom of "how to succeed in business". The book
published was named: "In Search of Excellence" and was followed
shortly afterwards by "The Winning Performance" , once again a best
seller among business books.