Analysis of UK VC Financial Returns October 2019 by British Business Bank

https://techcelerate.ventures
UK VC should be an attractive option for both LP investors already investing in US VC, and LPs not currently invested in VC and considering both the US and UK. Our analysis shows: • that UK VC funds with a 2002-2006 vintage outperformed US VC funds of the same vintage in terms of their DPI and TVPI money multiples • that, from 2007 onwards, the performance of UK VC funds is comparable to the US, with UK performance only slightly lower than US funds of the same vintage • that UK VC funds share a similar distribution of returns compared to US funds, apart from a small number of top US funds that outperform significantly.
About Techcelerate Ventures

Tech Investment and Growth Advisory for Series A in the UK, operating in £150k to £5m investment market, working with #SaaS #FinTech #HealthTech #MarketPlaces and #PropTech companies.
Fund BRITISH BUSINESS BANK VC Fund RETURN UK VC Financial RETURN perform
https://techcelerate.ventures
About Techcelerate Ventures

Tech Investment and Growth Advisory for Series A in the UK, operating in £150k to £5m investment market, working with #SaaS #FinTech #HealthTech #MarketPlaces and #PropTech companies.
Fund BRITISH BUSINESS BANK VC Fund RETURN UK VC Financial RETURN perform
Analysis of UK VC  
Financial Returns
October 2019
2 
BRITISH BUSINESS BANK
3
ANALYSIS OF UK VC FINANCIAL RETURNS
CONTENTS
For these markets to work efficiently, information needs  
to be made available that is both transparent and accessible. 
That’s why the British Business Bank undertakes an  
extensive programme of research and analysis throughout  
the year, looking at both finance markets overall and, 
when required, specific asset classes.
A lack of evidence demonstrating a strong track record 
of an asset class can restrict institutional investors from 
investing, reducing supply. Information on the historic 
performance of the UK’s Venture Capital (VC) industry,  
in particular, has not been fully transparent, contributing 
to a lack of such finance being available to high growth 
potential businesses.
In our recent Future of Defined Contributions Pensions 
report, we committed to take specific action to support 
greater transparency for LP investors. This report draws 
together data from existing data sources including 
PitchBook and Preqin, and from our own programmes, 
to provide as comprehensive a picture as possible of the 
asset class and its performance.
KEY FINDINGS
UK VC should be an attractive option for both LP investors 
already investing in US VC, and LPs not currently invested in  
VC and considering both the US and UK. Our analysis shows:
• that UK VC funds with a 2002-2006 vintage 
outperformed US VC funds of the same vintage in 
terms of their DPI and TVPI money multiples
• that, from 2007 onwards, the performance of UK VC 
funds is comparable to the US, with UK performance 
only slightly lower than US funds of the same vintage
• that UK VC funds share a similar distribution of 
returns compared to US funds, apart from a small 
number of top US funds that outperform significantly. 
DRAWING FROM OUR OWN EXPERIENCE
The British Business Bank is the largest UK based LP 
investing in UK VC, having committed, since 2006, £1.5bn 
of investment into 67 funds through the Enterprise Capital  
Fund (ECF) programme and the more recent, British Patient 
Capital programme, established last year.
British Patient Capital (BPC) invests on a commercial basis 
into VC funds targeted at UK scale-up companies. While it’s  
too early in the life of BPC to draw definitive conclusions, 
the outlook for future performance is promising, with early  
DPI multiples being identical to the wider market for funds  
of the same vintage. The pooled TVPI multiple for private 
sector LP investors in VC funds under our ECF programme 
is higher than the wider UK market, partly due to the 
‘geared’ returns structure we offer.
The overall performance of the funds the British Business 
Bank has invested in provides further specific evidence of  
the positive returns that can be generated by UK VC funds. 
This report is an important first step in improving VC 
financial returns data to help build investor confidence  
in the asset class. 
We will continue to work with the wider VC industry to 
improve data coverage and accuracy still further. In doing 
so, we aim to help more high-growth innovative businesses 
in the UK get the finance they need to become the global 
success stories of tomorrow.
FOREWORD
KEITH MORGAN,  
CEO OF BRITISH BUSINESS BANK
The British Business Bank is the UK government’s business development bank. Established in November 
2014, its mission is to make finance markets for smaller businesses work more effectively, enabling those 
businesses to prosper, grow and build UK economic activity.
3  
FOREWORD 
4  
EXECUTIVE SUMMARY
8  
INTRODUCTION
10 SECTION 1: 
 
VC FUND FINANCIAL RETURN METRICS
13 SECTION 2: 
 
SOURCES OF VC FUND FINANCIAL RETURNS INFORMATION
16 SECTION 3: 
 
VC FINANCIAL RETURNS ACROSS DIFFERENT DATA SOURCES
22 SECTION 4:
 
LONG RUN VC FINANCIAL RETURNS
25 SECTION 5:
 
VC FINANCIAL RETURNS ACROSS GEOGRAPHY
32 SECTION 6:
 
BENCHMARKING BBB AND BPC VC FUND PERFORMANCE 
 
TO THE WIDER MARKET
34 SECTION 7:
 
CONCLUSIONS
36 APPENDIX: 
 
METHODOLOGY
38 ACKNOWLEDGMENTS AND ENDNOTES
4 BRITISH BUSINESS BANK
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ANALYSIS OF UK VC FINANCIAL RETURNS
2. MOST VC FUNDS DO NOT PUBLICLY DISCLOSE THEIR 
PERFORMANCE DATA
The variability in reported UK and European VC financial 
returns is partly due to data providers capturing the financial 
performance data from a relatively low proportion of the 
total number of VC funds in the market. British Business 
Bank analysis of Preqin shows this data source captures 
the TVPI multiples for just 13% of Rest of Europe VC funds 
with a 2002-2017 vintage year. This means coverage is 
not representative of the wider population of funds and 
heavily dependent on the sample composition of funds 
included. Preqin captures TVPI multiples for 22% of UK 
VC funds, which is higher than the Rest of Europe coverage.
US Freedom of Information (FOI) legislation requires US 
public pension funds to disclose the performance of their 
investments into VC funds. This means data providers tend 
to have more representative coverage of US VC funds, 
although coverage has declined over recent years.  
Preqin captures TVPI multiples for 21% of US funds  
with a 2002-2017 vintage. 
In order to increase fund coverage, the British Business Bank 
has combined fund level data from several commercial data 
sources including PitchBook and Preqin with performance 
data on the VC funds the Bank has invested in. This approach 
will help to reduce the uncertainty around UK fund 
performance by increasing the relative coverage of 
existing datasets. 
KEY FINDINGS
1. ESTIMATES OF THE FINANCIAL PERFORMANCE OF 
UK AND EUROPEAN VC FUNDS VARY SIGNIFICANTLY 
BETWEEN DATA SOURCES 
There are several data sources providing information on 
the financial returns generated by UK VC funds, including 
commercial data providers such as PitchBook and Preqin 
and organisations representing the VC industry such as 
the British Venture Capital Association (BVCA). However, 
these sources are not fully consistent and there are large 
variations in reported returns figures for identical vintage 
years. For instance, the reported pooled DPI multiple for 
UK based VC funds in the 2002-2013 vintage year cohort 
varies from 0.87 to 1.54, and the reported pooled TVPI 
multiple varies from 1.50 to 2.06. The wide variation in 
reported returns figures creates uncertainty on the  
actual level of performance.
In contrast, reported US VC financial return multiples  
are more robust with different data providers showing 
substantially less variation in the performance of VC funds 
with the same vintage years. For instance, both PitchBook 
and Preqin show pooled DPI multiples of around 1.00 for 
2002-2013 vintage funds and pooled TVPI multiples in the 
range of 1.60 to 1.73 for VC funds in the same vintage year 
cohort. This is also supported by published Cambridge 
Associates data which shows yearly trends in reported 
DPI and TVPI multiples for US based VC funds are within 
 a similar range and follow consistent trends over time.
EXECUTIVE
SUMMARY
Venture Capitalists provide funding to early-stage 
companies with the potential for high growth. 
Venture Capitalists usually invest through a Limited 
Partnership fund structure, raising funding from 
Limited Partners (LPs) such as pension funds and 
insurance companies who are themselves looking 
for a return on their capital. 
For institutional investors to invest in Venture Capital (VC) 
they require evidence that the asset class can generate 
sufficient financial returns to offset the higher levels of 
risk and illiquidity in VC compared to public markets. 
There is currently no existing data source that has complete  
coverage of all UK VC funds, with data sources having 
relatively low coverage of VC funds and the financial returns 
information not being fully verified. The British Business 
Bank has tried to overcome these issues by combining data 
from several commercial data sources such as PitchBook 
and Preqin, alongside data from funds the Bank has invested 
in, to provide a more comprehensive picture of VC 
financial returns in the UK. 
This report is compiled on a ‘best endeavours’ basis using 
the most reliable data available. We welcome comments 
and suggestions for ways in which UK VC financial returns 
data can be improved. 
The report focuses on financial returns using money 
multiple measures only, as these can be calculated 
consistently across different data sources:
• Distribution to Paid-In capital (DPI): Realised fund 
returns as a percentage of the capital contributed. 
This directly measures the cash received from 
portfolio company exits.
• Total Value to Paid-In capital (TVPI): Realised and 
unrealised fund returns as a percentage of the capital 
contributed. This includes the realised returns and 
the ‘book value’ of unrealised investments and is 
useful for assessing performance during the early 
part of a fund’s life.
The report examines the financial performance of VC in 
isolation and does not try to compare VC performance 
against other asset classes or against wider Private 
Equity (PE).
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BRITISH BUSINESS BANK
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ANALYSIS OF UK VC FINANCIAL RETURNS
BRITISH BUSINESS BANK RESPONSE
The British Business Bank and BPC will seek to make 
available more aggregate level data on the financial 
performance of funds it has invested in, in order to build 
up our own track record, but also demonstrate that the 
UK VC market could be an attractive asset class for LP 
investors.
The Bank has already committed to take action to support 
greater transparency for LP investors. Our recent ‘Future 
of Defined contributions pensions’ report3 stated ‘The 
British Business Bank will continue to take the lead in 
improving the quality and availability of UK industry-level 
data on historic returns, increasing the broader transparency 
of the asset class’. This report is a first step towards 
demonstrating our commitment to improving VC  
financial returns data by using existing available data.
The Bank recognises the importance of accurate data to 
ensure current and future LPs can make an informed 
decision for investing in the VC asset class and looks forward 
to working with the wider VC industry to improve fund 
coverage and accuracy.
4. PERFORMANCE OF FUNDS THE BRITISH BUSINESS 
BANK HAS INVESTED IN PROVIDES ADDITIONAL 
EVIDENCE OF THE POSITIVE RETURNS GENERATED BY 
UK VC FUNDS
The British Business Bank is the largest UK based LP 
investing in UK VC, giving the Bank access to verified 
financial returns information from the funds that it has 
invested in. The numbers presented in this report may 
differ to the financial returns reported in the British 
Business Bank and British Patient Capital (BPC) annual 
reports due to differences in fund coverage and time 
periods assessed.1 
The British Business Bank has analysed the performance 
of the Enterprise Capital Fund (ECF) programme, which 
was established in 2006 to increase the amount of equity 
finance available to high growth innovate SMEs affected 
by the equity gap.2 For VC funds supported by the ECF 
programme in the 2006-2016 cohort, the pooled DPI 
multiple is 0.47 overall (0.50 for other LPs). The ECF pooled 
DPI multiple is lower than the wider UK VC market DPI of 
0.77, which may reflect the earlier stage nature of these 
funds compared to the wider UK market, meaning realised 
returns take longer to achieve.
VC funds within the ECF programme have a pooled TVPI 
multiple of 1.41 (1.78 for other LPs), which shows the ‘geared’ 
returns structure for private sector LP investors is working 
as returns are now higher than the wider UK VC market 
of 1.63 within the 2006-2016 cohort. This higher level 
of performance could make the ECF programme an 
attractive asset class for LP investors when considering 
UK VC.
BPC is investing on a commercial basis into VC funds 
targeted at UK scale-up companies. For those VC funds BPC  
has invested in between 2013-2016, the pooled DPI 
multiple generated to date is 0.18 and this is identical to 
the wider UK VC market DPI for funds of the same vintage.
Although, the BPC pooled TVPI multiple of 1.29 is 
slightly lower than the UK market benchmark of 1.40 for 
funds of the same vintage, the BPC median fund TVPI 
performance is 1.21. This is higher than the equivalent 
UK market figure of 1.18. It is too early in the life of BPC 
to draw meaningful conclusions concerning future 
performance as most BPC invested VC funds are too 
young to be included in the analysis.
3. UK VC RETURNS FOR FUNDS ESTABLISHED SINCE 
2002 ARE CLOSE TO CURRENT AND HISTORIC US VC 
FUND PERFORMANCE
It is widely perceived that US VC financial returns are 
consistently and substantially higher than UK VC financial 
returns, but analysis of data within this report suggests 
that this is not the case.
In fact, UK VC funds with a 2002-2007 vintage 
outperformed US VC funds of the same vintage. UK funds 
within this vintage year cohort generated a pooled DPI of 
1.95 compared to 1.04 for US funds. This is due to strong 
performance of UK funds within this cohort, but also due 
to the underperformance of US VC funds, possibly a result 
of the legacy of the dot-com bubble bursting. 
Moreover, the above-mentioned pooled DPI returns for  
UK VC funds are only slightly lower than the historical 
performance of US VC funds in the 1980’s and 1990’s.  
The average yearly pooled DPI multiple for US funds in 
the 1980’s was 2.22 and for funds established in the 1990’s 
the figure was 2.56. Although US VC funds generated very 
high financial returns (DPI multiples in excess of 4) in several 
vintage years during the mid-1990s (e.g. 1993 to 1996), 
these returns were not sustained over the entire 1980-
1999 time period. 
From 2007 onwards, the financial performance of UK VC 
funds is slightly lower than the US. UK pooled TVPI is 1.54 
compared to 1.88 for US funds with 2007-2011 vintage. 
Whilst both UK DPI and TVPI pooled multiples are only 0.3 
points lower than US funds, with the same 2007-2011 
vintages, the median figures are much closer.
Over the combined 2002-2011 vintage year cohort, 
performance of UK VC funds is slightly ahead of the US 
on both pooled DPI and TVPI measures, providing further 
evidence that UK VC performed relatively well over the 
whole decade.
The UK has a similar fund distribution of TVPI returns  
as US funds, but the top performing US funds have 
substantially higher TVPI multiples than the top UK VC 
funds. This suggests that UK VC could be an attractive 
asset class for LPs considering investing in US VC.
8 BRITISH BUSINESS BANK
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ANALYSIS OF UK VC FINANCIAL RETURNS
This report aims to shed new light on the financial returns 
from investing in VC by examining existing VC data sources  
alongside information on the financial performance from 
the funds the Bank has invested in. The report does not 
compare the performance of VC against other asset 
classes or examine the financial returns from investing  
in wider PE.
THE STRUCTURE OF THE REPORT IS BROKEN DOWN  
AS FOLLOWS:
• Section 1 provides an overview of different metrics 
for measuring VC financial returns including IRR, 
money multiples (DPI and TVPI) and other metrics 
used within the VC industry.
• Section 2 describes the different data sources that 
provide information on financial returns.
• Section 3 compares reported financial returns across 
different data sources and investigates why these 
differences exist.
• Section 4 then examines financial returns across time 
to identify common time periods in which to compare 
performance. An assessment of US VC returns in the 
1980’s and 1990’s is also made in order to assess the 
potential long-term performance of this asset class 
from funds that are fully liquidated. 
• Section 5 provides an empirical comparison of 
the financial returns across the UK and US using a 
composite dataset that combines fund level data 
from Preqin, PitchBook and British Business Bank 
commitments into VC funds.
• Section 6 assesses the performance of VC funds the 
British Business Bank and BPC has invested in and 
benchmarks them against the wider VC market for 
funds of a similar vintage.
• Section 7 sets out conclusions and discusses next 
steps for improving financial returns data.
Information on the methodology used to create the 
combined dataset can be found in the report’s appendix. 
• Long-time illiquid asset: The typical life cycle of an 
LP commitment into a VC fund is usually 10 years or 
more, and there are limited liquidity options for LP’s 
to withdraw their commitments if they change their 
minds or their circumstances change.10 The final 
performance of a fund is not known until the fund has 
fully exited all of its investments, which can take many 
years to occur. British Business Bank research11 shows 
that the average time from initial investment to IPO 
is 5.3 years for successful UK VC-backed companies.   
Fund managers often cannot wait until returns are fully 
realised to report them, as they are required to report 
progress to the fund investors (LPs) under the Limited 
Partnership Agreements (LPAs) and also are likely to 
be thinking about raising subsequent funds.12 This 
creates difficulty because active funds will have 
unrealised returns (the theoretical value of the equity 
stakes taken), and any reported return number must 
estimate the value of these assets.
• Unrealised investments are difficult to value:  
This is especially the case when a substantial proportion 
of a fund’s portfolio is made up of pre-revenue companies 
with most of their value in intangible assets.13 Although 
funds follow and reference the International Private 
Equity and Venture Capital Board’s (IPEV) valuation 
guidelines, valuing equity stakes in non-listed 
companies involves an element of judgement.14 
Company valuations can also change rapidly when 
the company’s circumstances change, for instance, 
when the company receives a major contract or the 
technology is proven to work. It is difficult to extrapolate 
10 years of future cash flows to value a pre-revenue 
company when there are large amounts of market 
and technology risk. 
• Existence of a ‘J-curve’: PE is a long-term investment 
which, in the first few years, will normally show a 
decline in the Net Asset Value (NAV) before showing 
any significant uplift. This is often the effect of 
management fees being paid out, as well as the 
costs of initial capital being deployed into companies.   
Company failures become apparent more quickly,  
but company successes take longer to materialise.
There are also complexities around classifying VC funds, when 
funds make deals across different investment stages including 
PE deals and issues around specifying the vintage year.15
other asset classes is important for signalling the value  
of investing in VC. 
There is a lack of robust information on VC financial 
returns at the individual investment level and at the fund 
level. This is holding back the wider asset class as without 
evidence of a strong track record of generating financial 
returns in line with the level of risk taken, institutional 
investors are wary of committing or increasing funding 
allocation to VC. Reliable data demonstrating high VC 
returns could help unlock greater institutional funding 
into this asset class. This in turn leads to greater VC 
fundraising and increased amounts of equity finance 
available to smaller businesses with high growth potential.
Accurately measuring the returns of VC funds is very 
difficult because the data is known to be ‘subject to biases’.8 
The nature of the VC industry amplifies these problems:
• No requirement for VC funds to publicly disclose 
information: PE is by its nature ‘private’ with fewer 
requirements to make information available compared 
to investments made in public companies. VC investors 
are not required to disclose information to regulators 
about specific deals they make or the performance 
of those deals, so a comprehensive dataset with full 
industry coverage doesn’t exist.
• Wide dispersion in industry performance: 
It is estimated that the top US VC firms make a 
disproportionate contribution to total industry returns.9 
Therefore, omission of even a small number of these 
top VC funds can heavily affect the overall returns 
reported. 
INTRODUCTION
Venture Capital (VC) is a type of Private Equity (PE) finance 
provided by investors into small early-stage companies 
with the potential for very high growth. Finance is provided 
in return for an equity stake in the business and investors 
generate a financial return (or profit) on their investment 
when they sell their stake through an Initial Public Offering 
(IPO), trade sale or secondary sale. VC-backed companies 
are unlikely to have positive cash flows, or even be 
generating any sales at the time of investment. It may 
therefore take many years until a company has developed 
its technology and market position to allow a VC investor 
to exit with a positive return. Given the technology and 
market risks facing early stage companies of this type, a 
high proportion of investments will not return their capital. 
For instance, data from one investor showed 65% of its 
VC investments failed to return their invested capital.4  
If equity investors select the right deals, they can make 
very high returns from these investments. For example, 
Sequoia Capital (a US VC firm) generated approximately 
50 times returns on its $60m investment into WhatsApp 
when it was acquired by Facebook in 2014.5 The VC model 
relies on a small number of successful investments to 
pay for the investments that fail, with 10 times returns 
being quoted as a starting target.6 It is widely recognised 
that the Pareto Principle applies to VC returns with 20% 
of investments bringing in 80% of returns, and 1% of 
investments often bringing in more revenue than the 
rest of a fund’s investments combined.7 
The PE and VC industry has grown and matured substantially 
to become an established part of many institutional 
investors’ portfolios, with VC now recognised as a 
standalone asset class. Institutional investors are often 
looking to invest in long term growth asset classes, and 
VC funds achieve this with a typical life span of ten years 
or more. A history of generating good financial returns, 
both in absolute terms and relative terms compared to 
10 BRITISH BUSINESS BANK
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ANALYSIS OF UK VC FINANCIAL RETURNS
MONEY MULTIPLES
Multiples provide a relatively simple measure of an 
investor’s return on their invested capital, providing a 
cash-on-cash measure of how much investors are receiving 
back from the capital they have committed. Multiples are 
useful in that they show the scale of the returns but a key 
limitation is that the time value for money is completely 
ignored.19 A fund returning twice the invested amount 
will have the same multiple regardless of whether the  
return took two or ten years to materialise.
Two multiples that are typically reported by funds are 
Distribution to Paid-In capital (DPI) and Total Value to 
Paid-In capital, but it is also useful to know the Residual 
Value to Paid-In Capital (RVPI) which is the difference 
between the two multiples: TVPI = DPI + RVPI
Distribution to Paid-In capital (DPI): The ratio of 
cumulative distributions to LPs divided by the amount 
of capital contributed by the LPs. At the start of a fund’s 
life, this ratio will be zero due to there being no exits to 
date but will begin to increase as distributions (portfolio 
company exits) occur. When the DPI is equal to one the 
fund has broken even, as the money paid in is equal to 
money distributed. Any number above one indicates that 
the fund has paid out more than has been paid in, so 
that LP investors get more than their initial capital back.  
This measure is therefore useful at the later stages of a 
funds life as it is an actual measure of fund performance 
directly measuring cash received from exits.
MODIFIED INTERNAL RATE OF RETURN (MIRR)
Assuming a reinvestment rate equal to the fund’s cost of 
capital is a more reasonable assumption than using the 
same rate as the original investment and it is precisely 
for this reason that the Modified Internal Rate of Return 
(MIRR) has been developed.17 The MIRR uses a similar 
technique to IRR but assumes that positive cash flows are 
reinvested at the firm's cost of capital. The initial outlays 
are financed at the firm's financing cost rate, separate 
from the rate of return of the project, at which cash flows 
can be reinvested. It then calculates the rate of return by 
looking at all project cashflows, and accounts for the time 
value of money. 
As such, the MIRR is designed to more accurately reflect 
what is done with intermediary cash flows and give a more 
accurate picture of an investment’s profitability.  However, 
re-investment rates are likely to vary for different investors, 
based on their investment opportunities. MIRRs should 
only be compared to other MIRRs calculated using the 
same re-investment rate. Therefore, VC organisations 
like Invest Europe, which represents the European VC 
industry, do not recommend using MIRR as a measure for 
fund managers reporting returns to their LP investors18  
and MIRR does not appear to be widely used by the industry.
SECTION 1: 
VC FUND FINANCIAL 
RETURN METRICS
There are several ways to measure VC and PE financial 
returns. It is important to acknowledge that no single 
measurement represents the best way of measuring the 
performance of VC investments and deciding which measure 
to use is often context specific. When reporting the 
financial returns of their portfolios, fund managers and 
investors typically use the following types of measure:
• Internal Rate of Return (IRR)
• Modified Internal Rate of Return (MIRR)
• Money multiples:
- Distribution to Paid-In capital (DPI)
- Residual Value to Paid-In capital (RVPI)
- Total Value to Paid-In capital (TVPI)
INTERNAL RATE OF RETURN (IRR)
IRRs are widely used by the PE industry to measure returns 
because they offer a way of comparing two investments 
with irregular cash flow timings and sizes. The IRR represents 
the discount rate at which the Net Present Value (NPV) of 
an investments future cashflows is equal to zero. The IRR 
measure incorporates the time value of money, so that 
£100 of returns generated sooner is valued more than 
£100 realised in the future. 
Whilst this measure is useful, the fundamental issue of 
using the IRR in isolation is that it rewards quick exits in the 
early years. There is the potential for fund performance 
to be artificially improved by fund managers exiting their 
investments sooner, rather than the fund manager allowing 
the company to grow to maximise its value.16 This is because 
IRR implicitly assumes the intermediary cash flows generated 
by an investment are reinvested and return the same IRR 
as the original investment. This is unlikely to be realistic 
as it implies a fund immediately finds an equally 
profitable opportunity to reinvest in. 
12 BRITISH BUSINESS BANK
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ANALYSIS OF UK VC FINANCIAL RETURNS
OTHER FACTORS
There are large variations in performance between the 
top performing funds and the remaining funds. It is 
therefore useful to look at both the pooled mean and 
median fund return figures, alongside the upper and lower 
quartiles. The VC industry has a focus on benchmarking 
upper quartile funds but there is no universal method 
for choosing the reference period or specific reporting 
metric, which will fluctuate from year to year depending 
on the composition of funds included.24
Pooled Mean: The return for the total group of funds being 
analysed. This is calculated by aggregating the realised 
and unrealised values across all funds, which accounts 
for different fund sizes. This is the best measure for 
estimating total market returns as it includes the 
performance of all outlier funds.
Median: The fiftieth percentile. The return of a fund in 
the middle of the ranking. This represents the return of  
a ‘typical fund’.
Upper quartile: The return of the fund in the top 25th 
ranking. When all VC funds are considered, upper quartile 
fund performance is higher than the remaining three 
quarters of other funds. 
Another factor to consider when assessing financial 
return metrics is the impact of fees. Management fees allow 
the fund manager to meet their own operating costs, 
including salaries for the team and regulatory compliance. 
Carried interest fees relates to the fund manager’s 
performance-related share of realised profits from the 
fund. Management fees can be substantial. Most financial 
return metrics are reported net of fees (i.e. fees are deducted).
Finally, it is also important to acknowledge money 
multiple returns are reported in nominal terms. This is an 
important consideration given LP’s commit capital over a 
long time period lasting more than 10 years, and the real 
value of distributed returns will be eroded by inflation.
Residual Value to Paid-In capital (RVPI): The sum of 
cumulative net asset value of the investment, divided by  
the capital contributed by the LPs. It calculates the multiple 
of the investment that would be returned to investors if the 
unrealised assets were sold at current valuations. Valuation 
of early stage companies can be very difficult because of 
the inherent uncertainty surrounding the prospects of 
the company. However, the concept of ‘fair value’ is used 
to value the unrealised assets at each measurement date, 
with a number of recognised valuation techniques used.20 
The ‘Book value’ of unrealised investments is useful  
for assessing performance during the early part of a funds 
life, but offers no guarantee on future performance as 
valuations can change over time due to changes in wider 
economic and market conditions. For instance, a high RVPI 
may be indicative of an inflated market versus an accurate 
representation of how much the portfolio can actually be 
sold for eventually.21 Globally, there are a number of well-
known later stage unicorn businesses that have exited 
under their last private valuation round (known as a down 
-round). This will effectively lead to disappointed LP investors 
as the DPI does not match up to the projected RVPI.22
Total Value to Paid-In capital (TVPI): The sum of 
cumulative distributions to LPs and the net asset value of 
the investments, divided by the capital contributed by the 
LPs. It calculates what multiple of the investment would 
be returned to LP investors if the unrealised assets were 
sold at current valuations and added to distributions that 
have already been received. This is useful for assessing 
performance during the early part of a fund’s life, like the 
RVPI measure. While this can provide a more complete 
picture on the returns from the fund, it is significantly 
impacted by the valuation that is placed on the unrealised 
investments remaining in the fund, although the impact 
should reduce as the fund matures and investments  
are realised.
Given this difference, many LPs rely on the TVPI measure 
earlier in the life of a fund and DPI measure towards the 
end of a fund’s life.  Money multiples tend to be a more 
conservative measure than the IRR measure as a zero-rate 
of reinvestment is assumed for cash flows.23  
SECTION 2: 
SOURCES OF VC FUND 
FINANCIAL RETURNS 
INFORMATION
There are numerous data sources measuring VC financial 
returns. This section provides a short overview of the 
main types of data provider and a description of how 
they collect this information. Section 3 then provides a 
comparison of the reported financial returns across these 
different data sources.
There are three main types of data sources providing 
information on VC market financial returns:
• VC Associations
• Commercial data providers:  Named funds
• Commercial data providers:  Anonymised funds
VC ASSOCIATIONS: 
There are numerous industry associations across the 
globe representing the interests of the PE and VC 
Industries, based on their membership which largely 
comprises of fund managers. These organisations often 
report the investment activity of their members as well 
as the financial performance. The British Venture Capital 
Association (BVCA) represents the interests of the UK VC 
and PE Industry.25 
BVCA’s membership comprises of over 260 PE and VC 
fund managers. The BVCA, in conjunction with PwC and 
Capital Dynamics, undertakes an annual survey of its 
eligible members asking about the performance of the 
funds that they manage. To be eligible for inclusion the 
PE firm must be a full BVCA member, raise money from 
third-party investors and manage that money from 
the UK (although it may be invested elsewhere). BVCA 
members investing from their own balance sheet, quoted 
vehicles such as VCTs and listed PE are excluded from the 
fund returns.
The BVCA annually publishes financial returns 
information through its Performance Measurement 
Survey.26 The report examines the performance of PE 
and VC funds and then benchmarks them against other 
asset classes. Overall, 86 fund managers (with a total of 
629 funds under management) responded to the latest 
2017 survey. Fund data is presented anonymously in 
pre-defined categories relating to vintage year.  Whilst 
this provides useful segmentation of the data, it is not 
possible to disaggregate the data further. 
COMMERCIAL DATA PROVIDERS:  NAMED FUNDS (E.G. 
PREQIN AND PITCHBOOK)
Commercial data providers like Preqin and PitchBook 
primarily source information on the performance of 
funds from public filings by pension funds, Freedom Of 
Information (FOI) requests and voluntary disclosures by 
fund managers (General Partners-GPs) or LPs.
14 BRITISH BUSINESS BANK
15
ANALYSIS OF UK VC FINANCIAL RETURNS
These data providers allow customised searches on 
the performance of individual funds or tightly specified 
groupings of funds, e.g. over specific vintage years and 
geography. There are several recognised issues which can 
affect the reliability of data sources relying on self-disclosure 
and FOI submissions for their information:27
1. A lot of the data relies on voluntary submissions from 
fund managers themselves. There may be incentives 
for fund managers to report returns when they are 
performing well, especially if the fund manager is 
trying to raise another fund, or to stop reporting if 
performance subsequently deteriorates.
2. Due to the reliance on disclosure from public pension 
funds, funds without pension fund investors may not 
be as well captured. This could potentially cause bias 
in the data if pension funds invest in funds with different 
characteristics to other types of institutional investor. 
European coverage is likely to be lower as this reporting 
requirement does not apply to European pension funds.
3. These datasets also publish reported IRRs/ multiples 
without the underlying cash flow data, which often 
makes it difficult to verify the accuracy of the 
reported figures. 
PREQIN: 
• Preqin is a provider of data and intelligence to the 
alternative assets industry including PE, real estate, 
hedge funds, infrastructure, private debt and natural 
resources. It collects a range of information including 
funds and fundraising, performance, fund managers, 
institutional investors, deals and fund terms. Preqin 
has financial returns data for 1,254 US and European 
VC and Growth Capital funds with a vintage year 
between 2002 and 2018.
PITCHBOOK: 
• PitchBook is a source of information on global trends 
in PE and is widely used by the VC industry. PitchBook 
collects a wide range of data including deal-level 
information, fund performance, fundraising data 
and data relating to company exits. Pitchbook has 
financial returns data for 1,439 US and European 
VC and Growth Capital funds with a vintage year 
between 2002 and 2018.
COMMERCIAL DATA PROVIDERS: ANONYMISED FUNDS 
(E.G. CAMBRIDGE ASSOCIATES, BURGISS AND EFRONT-
PEVARA)
These companies source information in slightly different 
ways to one another, but mainly through the services they 
provide to Limited Partners and General Partners. For 
instance, Cambridge Associates is a global investment firm  
that manages custom investment portfolios for its clients. 
Burgiss is a provider of investment decision support tools 
for private capital, and sources data through private disclosure  
by LPs. eFront is a software provider of end-to-end 
solutions for alternative investments.  
These data sources have less sampling biases compared 
to data providers which source their information through 
web scraping, regulatory and voluntary disclosures, but 
coverage is limited to funds included in the service provided. 
For instance, Cambridge Associates provides investment 
advisory services to endowments and foundations, which 
may have different investment strategies compared to 
the wider market.28 Due to restrictions placed on the 
subsequent use of the data by the funds and LPs submitting 
their data, financial returns information can only be 
accessed in aggregated anonymised form and so is not 
possible to identify individual funds or examine the data 
further. In many cases, it is not possible to undertake the 
analysis of funds based in the UK. For this reason, these 
datasets are not examined further as part of this report.
OTHER SOURCES OF INFORMATION ON VC FINANCIAL 
RETURNS
The British Business Bank is the largest UK based LP 
investor in UK VC.29 The Bank monitors the performance 
of the funds it has invested in by collecting information 
directly from fund managers. LP status ensures this 
information is fully verified and has full coverage of funds 
it has invested in. In line with the Bank’s role in addressing 
market failures in finance markets, the characteristics of 
funds invested in through the Enterprise Capital Fund (ECF) 
programme may differ to the wider UK VC market due 
to their focus on early stage market, smaller deals sizes 
affected by the equity gap and emerging fund managers.
Since 2013, BPC through the Bank’s previous VC Catalyst 
programme has invested on commercial terms in VC 
funds targeting UK scale up companies.30 It is early days 
in the life of these funds, but a summary of performance 
to date compared to the wider VC market is included in 
Section 6.
The European Investment Fund (EIF) is also a large investor 
in VC funds and has published information on the 
performance of its VC portfolio by vintage year and country.31
There are other sources of information on VC markets 
including Crunchbase32, Dealroom33 and Beauhurst.34 
These provide information on VC deals, exits and investors, 
but currently do not provide information on VC fund returns.
16 BRITISH BUSINESS BANK
17
ANALYSIS OF UK VC FINANCIAL RETURNS
1.50
1.62
2.06
1.55
1.74
therefore may not be fully representative of the wider UK 
VC market. The BVCA data in the sample is only reported as 
of December 2017, whereas data from the other providers 
has been updated much more recently. It is notable that 
the BVCA pooled mean average is above the upper quartile 
fund performance, which could suggest the BVCA returns 
figures are influenced by a small number of highly 
successful larger funds.  
Drawing comparisons in performance between the British 
Business Bank backed funds and the PitchBook and Preqin 
reported multiples may also not be a fair comparison. Most 
of the British Business Bank supported funds within the 
2002-2013 vintage year cohort are part of the ECF 
programme,37 which is predominately targeted at addressing 
market failures affecting early stage companies, through 
investment in emerging fund managers. As a result, the 
funds in this sample are therefore likely to be smaller than 
the wider VC market and targeting companies at an earlier 
stage of development. Also, since the ECF programme only 
started in 2006 the British Business Bank portfolio within 
this sample is weighted to the later vintage years (2006-
2013).38 This could adversely affect reported performance 
as the fund managers in the British Business Bank cohort 
will have had less time on average to exit their investments.
SECTION 3: 
VC FINANCIAL RETURNS 
ACROSS DIFFERENT 
DATA SOURCES
There is uncertainty on the actual performance of UK VC 
funds due to the large variation between different data 
sources in the reported VC return for the same vintage 
years. This makes it difficult for institutional investors  
to assess the track record of the asset class.
Figures 1 and 2 show the pooled average, median average 
and the upper/ lower quartile DPI and TVPI multiples for 
UK VC funds within a 2002-2013 vintage year cohort. 
This time period was selected to be consistent with the 
data reported in the latest full BVCA Measurement Report.35 
Reported pooled average DPI multiples for the 2002-2013 
vintage cohort of UK-based VC funds vary between data 
sources from 0.87 to 1.54, whilst reported pooled TVPI 
multiples for the same cohort vary from 1.50 to 2.06.36   
Commercial datasets like PitchBook and Preqin tend to report 
higher fund financial returns for the UK when compared 
to published BVCA numbers and British Business Bank 
programmes. This could be a result of fund selection bias 
with good performing funds having a higher propensity 
to disclose their data to PitchBook and Preqin, or poorer 
performing funds choosing to not publicly disclose their 
financial returns. The BVCA data may also differ because 
coverage reflects its membership. BVCA includes the names 
of the fund managers responding to its survey, which 
mainly comprises of established fund managers, and 
FIG 1
COMPARISON OF UK VC 2002-2013 VINTAGE YEAR DPI FUND 
PERFORMANCE BY DATA SOURCE  
Source: British Business Bank analysis of PitchBook, Preqin and BBB MI data
Lower Quartile
Lower Quartile
Upper Quartile
Upper Quartile
Median
Median
Pooled
Pooled
1.40
1.60
1.80
DPI1.20
1.00
0.80
0.60
0.40
0.20
0.00
n=84
n=37
n=35
n=14
n=63
BVCA
PitchBook
Preqin
BBB 
(ECF & BPC)
Combined 
(PitchBook, Preqin 
& BBB)
0.87
0.90
1.54
0.67
1.03
FIG 2
COMPARISON OF UK VC 2002-2013 VINTAGE YEAR TVPI FUND 
PERFORMANCE BY DATA SOURCE  
Source: British Business Bank analysis of BVCA, PitchBook, Preqin and BBB MI data
2.50
TVPI1.50
2.00
1.00
0.50
0.00
n=84
n=37
n=35
n=14
n=63
BVCA
PitchBook
Preqin
BBB 
(ECF & BPC)
Combined 
(PitchBook, Preqin 
& BBB)
18 BRITISH BUSINESS BANK
19
ANALYSIS OF UK VC FINANCIAL RETURNS
Only a small number of the funds the British Business Bank 
has invested in provide data to PitchBook or Preqin on their 
financial returns. The Bank has compared the performance 
of individual funds it has invested in, against the data these 
funds have reported to PitchBook or Preqin in order to 
assess the reliability of the self-reported data. In most 
cases, the reported figures are comparable to the ones 
recorded under the Bank’s MI system with only small 
differences, suggesting these commercial data sources 
give a reliable indication of fund performance.  
Reported DPI multiples in commercial data providers 
generally lie within 0.05 points of the figures reported in 
the Bank’s MI data and the pooled TVPI generally lie within 
0.40 points of the figures the Bank holds on fund 
performance. Differences may exist due to timing, LPs 
investing at first or second close and possible exchange rate 
effects but there is no evidence of these funds systematically 
reporting higher returns to commercial data providers.   
However, for a very small number of funds the reported 
figures are substantially different, the reasons for which 
cannot be explained by simply looking at the data.39 This 
analysis therefore suggests the underlying quality of 
reported returns from named fund databases is of  
sufficient quality to draw conclusions at the market level.
A comparison is also made between PitchBook and Preqin 
for the US and Rest of Europe for the same cohort of funds 
with vintage years 2002-2013.40 Figure 3 shows the reported 
PitchBook and Preqin financial return multiples for the US 
are very similar to one another. TVPI multiples for US funds 
in this cohort are 1.73 and 1.60 for PitchBook and Preqin 
respectively. Pooled DPI is also very close at 1.02 for 
PitchBook and 1.01 for Preqin. This provides reassurance 
that the US VC returns reported by PitchBook and Preqin 
are an accurate reflection of VC performance in the US.  
Figures 4 and 5 further examines the accuracy of PitchBook 
and Preqin’s reported figures by comparing them to Cambridge 
Associates data for the equivalent vintage years.41 All three 
data sources show similar yearly trends in their reported 
TVPI and DPI multiples.
FIG 3
COMPARISON OF US VC 2002-2013 VINTAGE YEAR FUND 
PERFORMANCE BY DATA SOURCE  
Source: British Business Bank analysis of PitchBook and Preqin
2.50
Multiple2.00
1.50
1.00
0.50
0.00
n=453
DPI
TVPI
n=489
n=453
n=489
PitchBook
PitchBook
Preqin
Preqin
1.02
1.01
1.73
1.60
FIG 4
COMPARISON OF US VC 2002-2017 VINTAGE YEAR POOLED DPI FUND 
PERFORMANCE BY DATA SOURCE  
Source: British Business Bank analysis of PitchBook, Preqin and Cambridge Associates
PitchBook
PitchBook
Preqin
Preqin
Cambridge Associates
Cambridge Associates
1.80
Pooled DPI1.40
1.60
0.80
1.00
1.20
0.60
0.20
0.40
0.00
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
FIG 5
COMPARISON OF US VC 2002-2017 VINTAGE YEAR POOLED TVPI 
FUND PERFORMANCE BY DATA SOURCES  
Source: British Business Bank analysis of PitchBook, Preqin and Cambridge Associates
4.00
Pooled TVPI3.00
3.50
2.50
2.00
0.50
1.00
1.50
0.00
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Lower Quartile
Upper Quartile
Median
Pooled
20 BRITISH BUSINESS BANK
21
ANALYSIS OF UK VC FINANCIAL RETURNS
Whilst there is little variation in reported DPI and TVPI 
multiples for US VC funds, the reported money multiple 
performance figures for funds based in the Rest of Europe 
(i.e. excluding the UK) show considerable variation. Figure 6 
shows PitchBook gives an estimated pooled DPI multiple 
of 1.20 for Rest of Europe VC funds compared to 0.76 for 
Preqin over the same 2002-2013 vintage year cohort.  
Figure 6 also shows differences exist in the reported pooled 
TVPI multiple with PitchBook reporting a multiple of 1.80, 
and Preqin reports a multiple of 1.52. We are not aware of 
any other published sources of information on European 
VC returns that can be used to verify the figures, but the 
large range in reported performance multiples creates 
uncertainty around the actual level of performance for 
Rest of Europe VC funds.42
EXPLAINING THESE DIFFERENCES
One reason for the divergence in the reported Rest of 
Europe returns figures between different data providers 
is the low propensity of VC funds and LPs disclosing their 
financial returns. Low coverage increases uncertainty 
around the actual level of financial returns as the sample 
of funds submitting returns data may not be representative 
of the wider fund population.
US Freedom Of Information (FOI) legislation requires US 
public pension funds to disclose the performance of their 
investments into VC funds. For example, the California 
Public Employees’s Retirement System (Calpers) publicly 
publishes fund level performance on its website of all the 
PE funds it has invested in, covering a total of 253 funds.43  
This means data providers tend to have more representative 
coverage of US VC funds. Whilst, the UK has no explicit legal 
obligation for public pension LPs to disclose performance 
data, the UK generally benefits from an open disclosure 
culture in order to promote the market and attract private 
institutional investors.
Comparing the number of VC funds with disclosed TVPI 
multiples in Preqin to the overall reported population of 
VC funds for each vintage year shows the relative coverage 
of funds disclosing data. Figure 7 shows Preqin captures 
the TVPI information of just 13% of the Rest of Europe 
VC funds with 2002-2017 vintage year. Coverage is likely 
to not be representative of the wider population of VC 
funds and heavily dependent on the composition of 
funds included in the sample.44 
A higher proportion of US funds (21%) disclose TVPI 
multiples, but Figure 8 shows the proportion has fallen 
over time.45 As a result, Preqin now captures financial returns 
information for a higher proportion of UK VC funds (22%) 
than the US over 2002-2017 vintage years. The decline 
in coverage for US VC funds since 2002 is also evident 
when looking at PitchBook data. Further analysis reveals 
it does not appear to be as a result of declining participation 
by public pension funds in US VC. A possible explanation 
is that since the financial crisis US fund managers and 
LPs have become less willing to disclose financial returns 
information, especially in the early part of a fund’s life.46 
The low proportion of funds reporting financial returns 
information relative to the population of VC funds in the 
market is common across all VC datasets and leads to 
increased uncertainty around the actual financial returns.  
FOI legislation in the US may help contribute to a more 
representative sample of US funds providing data.
The relatively low proportion of VC funds disclosing 
financial returns information provides strong justification 
for combining fund level data from different data sources 
to increase coverage, so that the sample of funds included 
is more representative of the wider population of VC funds. 
Fund level data on the performance of VC funds from Preqin 
and PitchBook was combined with data from the British 
Business Bank to create a composite dataset. This allows 
a more reliable assessment of VC returns to be made 
across different time periods and geographies.
Funds appearing more than once were removed from the 
combined dataset to avoid double counting. The appendix 
at the back of the report provides more details of the 
methodology used to aggregate and clean the dataset. 
FIG 6
COMPARISON OF REST OF EUROPE VC 2002-2013 VINTAGE YEAR FUND 
DPI AND TVPI PERFORMANCE BY DATA SOURCE  
Source: British Business Bank analysis of PitchBook and Preqin
n=37
DPI
TVPI
n=88
n=37
n=88
PitchBook
PitchBook
Preqin
Preqin
1.20
0.76
1.80
1.52
2.00
Multiple1.60
1.80
1.20
1.40
1.00
0.80
0.20
0.40
0.60
0.00
Lower Quartile
Upper Quartile
Median
Pooled
FIG 7
INCIDENCE OF VC FUNDS REPORTING FINANCIAL RETURNS MULTIPLES BY GEOGRAPHY
 
Number of VC funds 
Number of funds 
Proportion (% in bracket 
 
with 2002-2017 vintage 
reporting TVPI multiples 
2002-2012 vintage) 
UK 
236 
51 
22% (24%)
Rest of Europe 
1,045 
135 
13% (14%)
US 
3,363 
697 
21% (29%) 
 
Source: British Business Bank analysis of Preqin (5th September 2019)
ROE
UK
US
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
FIG 8
PROPORTION OF VC FUNDS REPORTING TVPI DATA BY VINTAGE 
YEAR (3-YEAR MOVING AVERAGE)  
Source: British Business Bank analysis of Preqin (5th September 2019)
40%
Per cent35%
30%
25%
20%
5%
10%
15%
0%
22 BRITISH BUSINESS BANK
23
ANALYSIS OF UK VC FINANCIAL RETURNS
The dot-com bubble burst in 2000, ending investors’ 
exuberance around a shift towards a new economy based 
on the internet. For VC funds established towards the end 
of the bubble from 1997, performance was substantially 
lower, with pooled and median DPI multiples of less than 
one in several years meaning these funds failed to return 
their investors capital.  
Assessing long run US VC financial returns over a 20-year 
time horizon, confirms very high fund performance was 
not sustained over the entire time period. Figure 10 shows 
the yearly average reported pooled DPI for funds with a 
1980’s vintage was 2.56, and for VC funds with a 1990’s 
vintage, the pooled DPI multiple was 2.22. The data 
challenges the perception that the US VC industry 
consistently produces very high fund returns and provides 
a benchmark for judging the current performance of the 
VC industry in the next section of the report.
FIG 10 
POOLED AND MEDIAN DPI FOR US VC FUNDS 
 
Average DPI  
Average DPI 
 
1980-1989 
1990-1999 
 
vintage years  
vintage years
Pooled DPI 
2.56 
2.22
Median DPI 
2.06 
1.51
Number of funds 
181 
356
Source: British Business Bank analysis of Preqin
49.5% to 28%. Changes to the Employee Retirement Income 
Security Act (ERISA) in the same year allowed pension 
funds to consider VC a ‘prudent’ investment,48 resulting  
in a flow of institutional money into VC, and providing  
the blueprint for how the VC industry operates today.  
Exploring the long run returns generated by the US VC 
industry provides an insight into what high level of financial 
returns might look like in a mature market. Preqin records 
financial returns data for US VC funds with a vintage of 
1980 onwards.49 Figure 9 shows US VC funds performed 
extremely well for selected years in the mid 1990’s with 
pooled DPI multiples in excess of 4 between 1993 and 
1995, at least 3 from 1991 to 1996. These high returns 
were driven in part by the emergence of the internet, 
albeit resulting in the dot-com bubble in the 1990’s, 
which led to rapidly increasing valuations and a flood  
of new technology company IPOs.  
SECTION 4: 
LONG RUN VC  
FINANCIAL RETURNS 
This chapter reviews long run financial returns, first for 
the US VC markets and then for the US and UK combined 
VC markets, highlighting both the long run trends and the 
significant variation between annual cohorts.
HISTORICAL US VC RETURNS:  1980-2001
The US VC market is widely acknowledged as the most 
developed VC market in the world, with the industry having 
matured over many years. The first US VC investors emerged 
in 1946, but it was the 1950’s and 1960’s before the US VC 
industry truly established itself with the Small Business 
Investment Act of 1958 which enabled the Small Business 
Administration (SBA) to grant licenses to Small Business 
Investment Companies (SBIC’s) to invest in companies. 
Many technology investment companies were launched 
in the early 1970s, including many well-known names 
such as Kleiner Perkins and Sequoia Capital.47 The increase 
in VC in the 1970’s coincided with two legislative changes. 
The 1978 Revenue Act reduced capital gains tax from 
Pooled average
Median
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990
1995
1991
1996
1992
1997
1993
1998
1994
1999 2000 2001
FIG 9
POOLED AND MEDIAN DPI FOR US VC FUNDS BY VINTAGE YEAR 
Source: British Business Bank analysis of Preqin (5th September 2019)
8.00
DPI7.00
6.00
5.00
4.00
1.00
2.00
3.00
0.00
24 BRITISH BUSINESS BANK
25
ANALYSIS OF UK VC FINANCIAL RETURNS
Pooled TVPI multiples decline below 1.50 for funds 
with a vintage of 2015 onwards, but this reflects their 
relative immature nature rather than a decline in the 
underlying fund performance.53 Funds are affected by the 
J-curve in the early stages of their life, meaning the 
reported returns of funds in the first couple of years do not 
generally reflect the return investors can expect over the 
longer term. Fund managers may keep the value of their 
unrealised investments close to cost until there is evidence 
of an increase in their value, whilst company failures may 
become more apparent early on. Although the 2005 vintage 
year performed well with a TVPI of 1.57, pooled TVPI was 
less than 1.50 between 2002 and 2004 which may suggest 
VC underperformed during the early part of the decade 
as a result of the dot-com bubble bursting.
Median TVPI multiples were relatively poor in the early 
2000’s at close to 1, but improved from 2005 onwards, 
providing support that VC performance has improved 
overall from the middle of the decade. Over the 10-year 
period between 2005 and 2014, yearly median fund  
TVPI returns averaged 1.47.  
US AND UK VC RETURNS:  2002 ONWARDS  
(POST DOT-COM BUBBLE)
Reviewing the performance of VC vintages from 2002 
onwards removes funds whose active portfolios were 
adversely affected by the bursting of the dot com bubble, 
and therefore provides a more balanced view of market 
performance. Figure 11 shows the pooled TVPI multiple 
for US and UK VC funds varies from 1.12 in 2003 to 2.04 
in 2011 and 2012. Likewise, the pooled DPI multiple  
varies from 0.03 in 2016 to 1.29 in 2002.  
It can take at least three years before VC funds start exiting 
their portfolio companies through IPOs, trade sales and 
secondary sales, but in practice the time scale to exit is 
much longer. British Business Bank analysis of PitchBook 
suggests UK VC-backed companies take 5.3 years on average 
to exit via an IPO.50 This explains why fund DPI multiples 
are less than 1 or close to zero for VC fund vintages after 
2009. The DPI return multiple is therefore not a useful 
measure of current or expected future performance 
during the early part of a fund’s life.
The overall VC asset class has consistently generated 
pooled TVPI multiples exceeding 1.50 from funds with a 
vintage year from 2007 onwards for eight consecutive 
years. Whilst representing a positive level of return, actual 
performance is lower than the widely quoted 3 times return 
benchmark many LPs quote as the required level of return 
to offset the risk and illiquidity of the asset class.51, 52
DPI (pooled)
DPI (Median)
TVPI (Pooled)
TVPI (Median)
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
FIG 11
OVERALL US AND UK VC FUNDS FINANCIAL RETURNS BY 
VINTAGE YEAR 
Source: British Business Bank analysis of PitchBook, Preqin and BBB MI data
2.50
Multiple2.00
1.50
0.50
1.00
0.00
SECTION 5: 
VC FINANCIAL  
RETURNS ACROSS  
GEOGRAPHY
High performing outlier funds can cause annual returns 
multiples to be volatile, as shown in Figures 10 and 11.  
Grouping vintage years together can reduce some of the 
distortion arising from annual noise and small sample sizes. 
In this section the data is also disaggregated by geography 
to compare UK and US performance, which further limits 
the sample size. To provide more meaningful analysis, 
vintage years are grouped into the following cohorts  
to analyse performance:
• 2002-2006: Post dot-com bubble
• 2007-2011: Recession and economic recovery 
• 2012-2016: Latest time period
These five-year time bands were selected to ensure broadly 
comparable data between the two countries. However, it is 
important to acknowledge that the UK and US economies 
were in recession at different time periods during the global 
financial crisis.54 In order to ensure the presented results 
are not being caused by the choice of year category, 
Figures 18 and 19 also provide a comparison between  
the UK and the US over time using two-year vintage year 
categories. Whilst UK data has a small number of funds 
reporting data, the inclusion of verified performance data 
from funds the British Business Bank has invested in means 
robust comparisons can still be made. The approach taken 
strengthens the reliability of the data and confirms the 
validity of the findings presented below.
Due to the low coverage of Rest of Europe VC funds and 
the large variation in reported performance between 
different data sources, performance figures for Rest of 
Europe are not reported in this section.  
Greater importance should be attached to VC financial 
returns generated by funds in the 2002-2006 vintage year 
cohort, as these funds have had enough time to invest, 
develop and exit most of their investments. Funds with 
a vintage year between 2007-2011 have had more time 
to develop than the most recent cohort, so can provide 
an indication of likely performance going forward, but a 
substantial proportion of the returns are not yet realised.  
Reported returns for the most recent 2012-2016 cohort 
are less likely to provide an accurate representation of actual 
underlying fund performance. These funds are still early 
in their life and will likely have not had enough time to 
develop companies to exit, thus DPI is expected to be low. 
Company valuations are also likely to be conservative due 
to the J-curve effect, and thus the reported TVPI for this 
cohort may not reflect the actual return investors can expect. 
TVPI valuations are themselves based on portfolio company 
valuations, which can change rapidly depending on company 
specific and wider market factors. A recent example of this 
is the ‘The We Company’, which was valued at $47bn 
during its last private round of funding, but greater investor 
scrutiny for its upcoming IPO could have valued the company 
at little more than $10bn.55 
Insufficient time to accurately  
measure VC returns
26 BRITISH BUSINESS BANK
27
ANALYSIS OF UK VC FINANCIAL RETURNS
2002-2006 VINTAGE YEAR COHORT
Figures 12 and 13 compare the pooled mean, median and 
upper/ lower quartile fund performance between the UK 
and US for funds in the 2002-2006 vintage year cohort.  
The UK exceeds the US in both the pooled TVPI and DPI 
multiples for this cohort of funds. UK VC funds generated 
a pooled DPI multiple of 1.95 and a pooled TVPI multiple 
of 2.17, compared to 1.04 and 1.35 for US VC funds 
respectively. Whilst there is less variation in the median 
DPI, the UK median DPI at 0.94 is again higher than the 
US multiple of 0.81.
UK VC funds outperforming their US counterparts in  
the 2002-2006 vintage year cohort is due to the 
combination of strong performance by UK funds and relative 
underperformance by US funds compared to historical data. 
Seven of the 24 UK VC funds included in this cohort reported 
a TVPI greater than 2, demonstrating the stronger UK 
performance was not caused by a single high performing 
outlier fund. Verified performance data from British 
Business Bank supported funds is also more positive for 
these vintages, confirming the validity of these findings.  
Analysis of Cambridge Associates data confirms the 
relatively poor performance of US VC funds in this cohort, 
especially compared to historic data. One explanation might 
be that US VC fund managers were more greatly affected 
by the bursting of the dot-com bubble in 2000 than UK fund 
managers, leading to relatively more cautious investment 
strategies amongst US fund managers in subsequent time 
periods. This would also help to explain why US upper 
quartile returns for this cohort are much lower than the 
equivalent UK figures, despite median performance being 
relative similar. 
A pooled DPI multiple of 1.95 for UK VC funds in this vintage 
year cohort appears to be comparable to the long-term 
performance of US VC funds in the 1980’s and 1990’s.  
US VC funds with a 1980’s vintage generated a pooled 
DPI multiple of 2.22 on average and funds with a 1990’s 
vintage had an average yearly pooled DPI of 2.56. In this 
context, the performance of UK VC funds is respectable, 
and could be attractive to LPs that have considered 
investing into VC.
UK VC industry outperformance in 2002-2006 vintages was 
grounded in strong market fundamentals. For institutional 
LPs new to the VC asset class, without privileged access 
to the most elite US VC funds, exposure to the wider UK 
VC sector is broadly comparable to the wider US VC sector.
FIG 12
DPI (2002-2006 VINTAGE FUNDS) BY GEOGRAPHIC AREA  
Source: British Business Bank analysis of PitchBook, Preqin and BBB MI data
Lower Quartile
Upper Quartile
Median
Pooled
n=24
UK
US
n=278
DPI2.50
2.00
0.50
1.00
1.50
0.00
1.95
1.04
FIG 13
TVPI (2002-2006 VINTAGE FUNDS) BY GEOGRAPHIC AREA  
Source: British Business Bank analysis of PitchBook, Preqin and BBB MI data
Lower Quartile
Upper Quartile
Median
Pooled
n=24
UK
US
n=278
TVPI2.50
3.00
0.50
1.00
1.50
2.00
0.00
2.17
1.35
2007-2011 VINTAGE YEAR COHORT
Figures 14 and 15 compare performance between the UK 
and the US of VC funds with a 2007-2011 vintage year. 
Despite UK funds outperforming US funds in the previous 
cohort, this was not sustained in the 2007-2011 vintage 
cohort. UK VC funds generated a pooled DPI multiple of 
0.86 and a pooled TVPI multiple of 1.54, compared to pooled 
DPI of 1.12 and TVPI of 1.88 for US VC funds. However, 
more positively, on both pooled DPI and TVPI multiples, 
the UK is only 0.3 points lower than the performance of 
US VC funds of the same vintage.  
Median performance is much closer; UK funds generated 
a median DPI of 0.72 compared to 0.71 in the US, and a 
median TVPI of 1.42 compared to 1.52 in the US. The similarity 
of median return multiples compared to the pooled returns 
suggests that the US pooled figure is driven by the 
performance of outlier funds that perform very well. This 
finding is supported by looking at the performance of the 
five highest performing funds in terms of reported TVPI 
multiple within the 2007-2011 cohort. The five highest 
performing US VC funds within this cohort had TVPIs 
multiples in the range of 7 to 9, whilst the five highest 
performing UK VC funds reported TVPI multiples in the 
range of 1.80 to 2.50. The distribution of VC financial returns 
between the UK and the US are explored further at the 
end of this section.
It is also important to point out that the difference in 
average VC returns between the UK and US for this cohort 
is far less substantial than the variation in returns within 
the individual VC markets. It follows therefore that investors 
willing to put money into US VC could also consider the 
UK market. 
FIG 14
DPI (2007-2011 VINTAGE FUNDS) BY GEOGRAPHIC AREA  
Source:  British Business Bank analysis of PitchBook, Preqin and BBB MI data
Lower Quartile
Upper Quartile
Median
Pooled
n=21
UK
US
n=255
DPI1.40
1.60
0.20
0.40
0.80
0.60
1.00
1.20
0.00
0.86
1.12
FIG 15
TVPI (2007-2011 VINTAGE FUNDS) BY GEOGRAPHIC AREA  
Source:  British Business Bank analysis of PitchBook, Preqin and BBB MI data
Lower Quartile
Upper Quartile
Median
Pooled
n=21
UK
US
n=255
TVPI2.50
0.50
1.50
1.00
2.00
0.00
1.54
1.88
28 BRITISH BUSINESS BANK
29
ANALYSIS OF UK VC FINANCIAL RETURNS
2012-2016 VINTAGE YEAR COHORT
This final section explores VC financial returns between 
the UK and the US for this most recent vintage year cohort. 
Figures 16 and 17 compare performance between the UK 
and the US of VC funds with a vintage year between 2012- 
2016. It is too soon to assess the DPI performance of funds 
in this cohort, as they are too early in their life to have had 
sufficient time to develop and exit many of their portfolio 
investments. Whilst UK VC funds have generated a pooled 
DPI multiple of 0.36, which is higher than the US (0.22), 
the median DPI for both geographies is 0. Therefore, most 
funds in this cohort have not yet made a single portfolio 
company exit which highlights the limited usefulness of 
analysing DPI multiples for such a recent cohort of funds. 
This also suggests VC investing requires patience as it 
takes many years to develop a company before it can  
be able to exit via a trade sale or IPO.
EXPLORING UK AND US VC RETURNS IN DETAIL
Combining the 2002-2006 and 2007-2011 vintage year 
cohorts together shows UK VC fund performance is slightly 
higher than the US over the full time period. The pooled 
TVPI multiple for UK VC funds over the 2002-2011 vintage 
year cohort was 1.74 compared to 1.62 for US funds. The 
UK also had a higher pooled DPI multiple of 1.20 compared 
to 1.08 for VC funds in the US. This provides further evidence 
that UK VC funds performed well during the decade.
TVPI multiples for this cohort are slightly more informative 
than DPI multiples, but there is little difference between 
pooled TVPI across the two geographies. UK VC funds with 
a vintage year between 2012-2016 have a pooled TVPI 
multiple of 1.49, compared to 1.52 in the US. There is also 
little difference in the range of TVPI values reported by UK 
funds and US funds, with the upper/lower quartiles being 
very similar between the UK and US. This reflects the 
limitations even TVPI has when analysing the returns of 
funds this early in their life, as fund managers will often 
value their portfolio company investments at close to cost  
until another financing round is raised.
FIG 16
DPI (2012-2016 VINTAGE FUNDS) BY GEOGRAPHIC AREA  
Source: British Business Bank analysis of PitchBook, Preqin and BBB MI data
Lower Quartile
Upper Quartile
Median
Pooled
n=51
UK
US
n=279
DPI0.35
0.40
0.05
0.10
0.15
0.20
0.25
0.30
0.00
0.36
0.22
FIG 17
TVPI (2012-2016 VINTAGE FUNDS) BY GEOGRAPHIC AREA  
Source: British Business Bank analysis of PitchBook, Preqin and BBB MI data
Lower Quartile
Upper Quartile
Median
Pooled
n=51
UK
US
n=279
TVPI1.60
1.80
0.20
0.40
0.60
0.80
1.20
1.00
1.40
0.00
1.49
1.52
FIG 18
US-UK DPI COMPARISON (2-YEAR VINTAGE COHORTS)  
Source: British Business Bank analysis of PitchBook, Preqin and BBB MI data
UK Pooled
UK Median
US Pooled
US Median
2002-2003
2004-2005
2006-2007
2008-2009
2010-2011
2012-2013
2014-2015
2016-2017
DPI2.00
2.50
1.00
0.50
1.50
0.00
FIG 19
US-UK TVPI COMPARISON TVPI (2-YEAR VINTAGE COHORTS)   
Source: British Business Bank analysis of PitchBook, Preqin and BBB MI data
UK Pooled
UK Median
US Pooled
US Median
2002-2003
2004-2005
2006-2007
2008-2009
2010-2011
2012-2013
2014-2015
2016-2017
TVPI2.00
2.50
3.00
1.00
0.50
1.50
0.00
Figures 18 and 19 compare VC returns in the UK and 
US over 2002-2017, but segmented into two-year 
vintage cohorts. Although the number of funds in each 
UK vintage year cohort is relatively small, this analysis 
is consistent with the above findings. UK VC funds 
outperformed their US counterparts during the early 
2000’s, but for more recent vintages US funds have 
slightly higher pooled TVPI multiples than UK funds.
30 BRITISH BUSINESS BANK
31
ANALYSIS OF UK VC FINANCIAL RETURNS
Overall the analysis demonstrates that for funds with a 
2002-2016 vintage, performance of UK VC funds is 
comparable to the performance of US VC funds. The pooled 
TVPI multiples of UK VC funds drops below the level of US 
VC funds for funds with a 2008 vintage onwards, after 
exceeding their US counterparts by a considerable  
margin for earlier vintages. 
The pooled DPI multiple of UK funds is ahead of US funds 
up to 2006-07, before declining in 2008-09 to below the 
US.  From 2012-2013, the performance gap between the 
US and UK narrows and the UK then subsequently tracks 
the performance of US funds closely. 
The relatively close performance between UK and US funds 
in reported median DPI and TVPI multiples over time may 
provide support for LPs to consider investing in the UK VC 
market. The median DPI of UK funds compares favourably 
to the equivalent US figure for many of the vintage year 
cohorts. UK median VC fund TVPI is much closer to the US 
median than the pooled TVPI multiples, with the UK median 
figure tracking closely the US figures from 2008-09 onwards. 
These findings suggest that the performance of most UK 
and US VC fund is very similar, but the higher pooled market 
returns reported for US VC funds is caused by the performance 
of top outlier funds. This conclusion is confirmed in Figure 
20 which shows the distribution of fund TVPI returns for 
UK and the US funds with a 2002 to 2016 vintage. Whilst 
the shape of the distribution is almost identical between 
the two countries for 92% of funds, US funds in the top 
8 percentiles have higher TVPI multiples than the 
comparable UK VC funds. 
The major difference therefore lies in the achieved 
multiples of these top performing funds. For instance, 
the top US VC fund in the sample achieves a TVPI of 13.8, 
whilst the highest UK fund TVPI is 5.7. 
Taken together, the findings presented in this report 
suggest UK VC could be an attractive option for both LP 
investors already investing in US VC and unable to access 
more allocation within the top US funds and those LPs not 
currently invested in VC and considering both the US and 
UK. A key challenge for the UK VC market is therefore to 
increase the performance these outlier funds which return 
over 5 times their committed capital and help contribute 
to the overall pooled market return figures.
FIG 20
RANKED TVPI DISTRIBUTION OF UK AND US VC FUNDS  
(2002-2016 VINTAGE YEARS)
Source: British Business Bank analysis of PitchBook, Preqin and BBB MI data
TVPI14.00
16.00
4.00
6.00
8.00
2.00
10.00
12.00
0.00
UK
US
Max
UQ
Median
LQ
Min
32 BRITISH BUSINESS BANK
33
ANALYSIS OF UK VC FINANCIAL RETURNS
for funds of the same vintage. However, the lower realised 
returns may reflect the earlier stage nature of the funds 
relative to the overall market leading to portfolio company 
exits taking longer to materialise.
VC funds within the ECF programme have a pooled TVPI 
multiple of 1.41, equating to 1.78 for other LPs. Other LPs 
in the ECF programme are therefore have the potential to 
make higher returns than the wider market (1.63 for the 
same vintage years), showing that the British Business 
Bank prioritised return mechanism is working as intended. 
This higher level of performance could make the ECF 
programme an attractive asset class for LP investors 
wishing to invest in UK VC.
Figure 22 shows for the VC funds BPC has invested in 
between 2013-2016, the pooled DPI multiple generated 
to date is 0.18.61 This is identical to the wider UK VC 
market pooled DPI for funds of the same vintage, which 
suggests the programme is performing as expected in terms 
of making a commercial return. It should be noted that it is 
early stage in the life of the programme, and performance 
is based on just 7 BPC supported funds, so these figures 
are likely to be highly volatile. It is also important to 
acknowledge that  there are large variations in the 
performance of individual funds within this overall figure.  
Although the BPC pooled TVPI multiples of 1.29 is slightly 
lower than the UK market benchmark (1.40) for funds of 
the same vintage, the BPC median fund TVPI performance 
is 1.21. This is higher than the equivalent UK market 
multiple figure of 1.18.  It is too early in the life of BPC to 
draw strong conclusions about future performance as most 
BPC invested VC funds are too young to be included in the 
analysis and most of the portfolio is currently unrealised, 
but the outlook for future performance looks promising.
SECTION 6: 
BENCHMARKING BBB 
AND BPC VC FUND  
PERFORMANCE TO  
THE WIDER MARKET
This section provides an overview of performance of VC 
funds the British Business Bank has invested in as an LP.  
These numbers may differ from the figures reported in the 
British Business Bank and BPC annual reports due to 
differences in coverage of funds.56 For instance, the BPC 
Annual Report shows the BPC portfolio had a TVPI multiple 
of 1.15 overall as at end of March 2019. 
The British Business Bank has analysed the performance57 
of the Enterprise Capital Fund (ECF) programme, which was 
established in 2006 to increase the amount of equity finance 
available to high growth innovate SMEs affected by the 
equity gap.58 Since inception the ECF programme has invested 
in 29 funds with a total of £1.3bn capital committed 
(including third party capital), making the programme an 
important part of the UK VC industry. The ECF programme 
has helped 16 fund managers to raise their first institutional 
fund, and so far, 63% of these have already gone on to 
raise a further fund.59 
The ECF programme is designed to address identified market 
failures leading to an equity gap by facilitating the 
establishment of VC funds targeting high growth potential 
companies seeking smaller amounts of equity finance.  
A key feature of the ECF programme is the ‘geared’ return 
structure designed to increase returns for private investors 
so that they are competitive with other market investment 
opportunities. The British Business Bank receives a 3% 
prioritised return but, after repayment of capital, the Bank 
receives a lower share of the profit compared to the other 
private investors in the fund.  In the event of good performance 
by the fund manager, private investors receive a greater 
share of the profits.
The overall pooled DPI multiple for VC funds60 invested in 
through the ECF programme between 2006 and 2016 is 
0.47, equating to a pooled DPI of 0.50 for other LPs. This 
is lower than the wider UK VC market pooled DPI of 0.77 
FIG 21
ECF VC FUND RETURNS (2006-2016 VINTAGES)    
Source: British Business Bank analysis of PitchBook, Preqin and BBB MI data
Pooled DPI
ECF Overall
ECF LP Returns
Overall UK VC
Median DPI
Pooled TVPI
Median TVPI
Multiple1.60
1.80
2.00
0.80
0.60
1.00
0.40
0.20
1.40
1.20
0.00
FIG 22
BPC VC FUND RETURNS (2013-2016 VINTAGES)   
Source: British Business Bank analysis of PitchBook, Preqin and BBB MI data
Pooled DPI
BPC
Overall UK VC
Median DPI
Pooled TVPI
Median TVPI
Multiple1.60
0.80
0.60
1.00
0.40
0.20
1.40
1.20
0.00
34 BRITISH BUSINESS BANK
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ANALYSIS OF UK VC FINANCIAL RETURNS
The ‘equity gap’ for smaller unquoted companies was first 
identified by the Macmillan Report in 1931 and provides the 
rationale for the British Business Bank’s activities today. 
Early stage equity investment in the UK has continued to 
suffer in the intervening years both from periods of actual 
poor investment returns and perceived poor investment 
returns. This is exacerbated by limited and opaque publicly 
available data on the performance of VC funds. 
However, the UK VC industry has transformed over  
the last decade as talent, networks, and exit routes have 
strengthened. These historical perceptions of poor 
investment performance are increasingly out of date. 
The British Business Bank was founded in 2014 to make 
finance markets for smaller firms work better. Through 
our commitments in equity fund managers, the Bank is 
an active investor supporting companies commercialising 
new technology emerging from UK universities and 
research laboratories. The Bank believes that catalysing, 
documenting and publicising strong, proven investment 
returns for the VC asset class makes the market work 
better in two ways:
First, the Bank is itself a large institutional investor into 
UK VC, primarily on a commercial basis. We seek returns 
on our investment in order to meet our own return targets, 
but also to satisfy our policy goal of encouraging private 
investment into the asset class. In the long run, there must 
be a strong business case based on both actual and expected 
investment returns to sustainably attract additional private 
institutional capital. Therefore, our investments seek to 
prove that such financial returns can be made, enriching 
both the Exchequer and the wider UK innovation ecosystem 
by attracting more capital.
Second, regular publication of more transparent and reliable 
performance data helps suppliers of investment capital to 
make asset allocation decisions with greater confidence. 
Such information can also encourage more scientific and 
investment talent to migrate to the UK VC sector, creating 
a positive reinforcement cycle. Our recent ’Future of defined 
contributions pensions’ report62 stated ‘The British Business 
Bank will continue to take the lead in improving the quality 
and availability of UK industry-level data on historic returns, 
increasing the broader transparency of the asset class’.  
The Bank therefore intends for this report to be the first 
of an ongoing series and become a trusted data source 
for the UK VC market.
Going forward, we intend to work with the wider VC 
industry to improve data coverage and accuracy. Comments 
and suggestions from all corners are most welcome.
The evidence shows that the absolute returns based on 
money multiples produced by the UK VC sector since 2002 
have been strong. Pooled TVPI multiples have been above 
1 throughout the relevant period of analysis, set against 
an investment environment of low interest rates. These 
market returns have been made through exposure to early  
stage companies and investments in software and other 
forms of emerging technology where the UK’s science 
and technical base is internationally competitive. 
In fact, the UK VC sector is competitive against its more 
developed counterpart in the US. UK VC returns are neither 
considerably nor consistently below those found in the US; 
rather, UK VC funds with a 2002-2006 vintage outperformed 
US VC funds of the same vintage. From 2007 onwards, the 
financial performance of UK VC funds has been comparable 
to the US with UK performance only slightly lower than 
US funds of the same vintage.  
UK VC funds share a similar distribution of fund TVPI 
performance compared to their much more numerous US 
peers, except for a handful of top American VC funds that 
greatly outperform. Moreover, whilst 17 US VC funds in the 
2002-2016 vintage cohort have a TVPI multiple greater 
than 5 compared to just 2 in the UK, this number comprises 
of just 2.1% of US VC funds, the exact same percentage as 
the UK. The major difference lies in the achieved multiples 
of these top performers, with the highest performing US 
funds generating TVPI multiples in excess of 10, but the 
highest UK fund TVPI is 5.7. This finding suggests UK VC 
could be an attractive option for both LP investors already 
investing in US VC and unable to access more allocation 
within the top US funds and those LPs not currently 
invested in VC and considering both the US and UK. 
The UK VC market has substantially less capital available 
than in than the US, even after accounting for differences 
in size of the two economies. The Bank’s 2019 Equity Tracker 
report63 shows the US VC market was 1.7 times larger than  
the UK between 2016 and 2018, despite the UK market being 
ahead of the US in terms of GDP-weighted deal numbers. 
This suggests UK companies are currently unable to raise 
the same levels of capital as there US counterparts, which 
may restrict company growth. This is evidenced by UK 
companies seeking larger rounds of equity finance being 
reliant on overseas investors64 to provide this capital, which 
could be a result of UK VC fund size lagging behind US VC 
funds.65 UK VC-backed companies are also less likely to 
use venture debt than their US counterparts.66 The 
conclusion is that there is scope for increased additional 
capital into the UK VC market without the risk of  
over-saturation. 
Greater transparency around the potential returns 
available from investing in UK VC could help unlock more 
institutional investment in the asset class, which could 
allow UK VC funds to increase in scale and better meet 
the funding needs of UK high-growth companies as they 
scale up.
SECTION 7: 
CONCLUSIONS
36 BRITISH BUSINESS BANK
37
ANALYSIS OF UK VC FINANCIAL RETURNS
4. Largest fund. This is to ensure subsequent  
fund-raising closures are captured
5. Oldest Vintage
• This gave a total combined dataset of 1,146  
unique VC funds with a 2002-2017 vintage year 
(Table A3) which was used for the financial returns 
analysis across different geographies in Section 4 
and 5.
• To increase coverage of funds, the individual funds 
from PitchBook, Preqin and BBB were all merged into 
one single data set. To avoid the same fund appearing 
more than once, funds were de-duplicated using the 
following sequential preference logic:68
1. British Business Bank supported fund.  
This information has been verified/ audited.
2. Most up to date reporting date. This to ensure  
the latest information is captured.
3. Lowest TVPI Multiple. This is to ensure most 
conservative data source is chosen.
• Data on individual VC and Growth Capital funds based 
in Europe and the United States with a 2002 to 2018 
vintage year was downloaded from PitchBook and Preqin 
between 26 July and 1 August 2019.  2002 was chosen 
as the first vintage year to avoid picking up effects from 
the dot-com bubble and also to be consistent with 
BVCA reporting. Fund data was downloaded in US 
dollars to be consistent throughout.  
• Data from British Business Bank MI systems was also 
extracted for funds under the ECF, UKIIF and British 
Patient Capital (including VC Catalyst) programmes 
as these programmes are delivered by private sector 
fund managers that have raised funding from private 
sector sources. The closed fund size was converted 
from Pound Sterling to US dollars using the relevant 
£/$ Exchange. This gave a total dataset of 2,764 US 
and European VC and Growth Capital funds (Table A1).
• Funds with missing data relating to fund size, PIC, 
TVPI and DPI were removed from the underlying 
dataset as it was not possible to calculate market 
return figures. For instance, the reported PIC, 
TVPI and DPI multiples were used to calculate the 
commitment drawn, realised value and unrealised 
values in relation to the reported fund size for the 
pooled financial return metrics.67 The individual 
reported fund TVPI and DPI multiples were used to 
calculate the median, quartile and decile returns figures. 
• The PitchBook and Preqin data was then cleaned to 
remove ‘old’ fund data, which might relate to funds 
strategically reporting returns, for instance by taking 
advantage of initial early returns. For funds with a 
vintage year between 2002-2010, funds with the 
latest reporting date less than seven years since fund 
inception was excluded. For funds with a vintage year 
of 2011 onwards, a reporting date of at least 2017 
was required.
• The data was then visually checked for errors with a 
focus on the largest reported TVPI and DPI multiples, 
but it was not possible or feasible to check the accuracy 
of reported information for every fund. 
• Funds were assessed to ensure only VC funds were 
captured. This sometimes involves reclassifying funds 
from their PitchBook and Preqin fund classification.  
All growth capital and buyout funds were removed 
from the dataset.  In addition, VC funds which entirely 
invested in geographic areas and developing countries 
outside of their listed location was also removed from 
the dataset. 
• This gave a total dataset of 1,664 VC funds with a 
2002-2017 vintage (Table A2). Financial returns figures 
may therefore differ to the numbers published by 
PitchBook and Preqin themselves which include all VC 
funds in their relevant fund populations. 2018 fund 
vintage was removed from the full A1 dataset due to 
insufficient time for fund performance to be assessed.
APPENDIX: 
METHODOLOGY
TABLE A1
NUMBER OF VC AND GROWTH CAPITAL FUNDS 2002 – 2018 BY GEOGRAPHY AND DATA SOURCE (RAW DOWNLOADED NUMBERS)
 
BBB 
PitchBook 
Preqin 
Total 
 
UK 
68 
139 
83 
290
Rest of Europe 
3 
141 
208 
352
US 
 
1,159 
963 
2,122
Total 
71 
1,439 
1,254 
2,764 
Source: British Business Bank analysis of PitchBook, Preqin and BBB MI data
TABLE A2
NUMBER OF VC FUNDS 2002 – 2017 BY GEOGRAPHY AND DATA SOURCE (CLEANED)
 
BBB 
PitchBook 
Preqin 
Total 
 
UK 
47 
58 
54 
159
Rest of Europe 
3 
54 
128 
185
US 
  
627 
693 
1,320
Total 
50 
739 
875 
1,664
Source: British Business Bank analysis of PitchBook, Preqin and BBB MI data
TABLE A3
NUMBER OF VC FUNDS 2002 – 2017 BY GEOGRAPHY AND DATA SOURCE (CLEANED AND DE-DUPLICATED)
 
BBB 
PitchBook 
Preqin 
Total 
 
UK 
45 
36 
29 
110
Rest of Europe 
3 
32 
114 
149
US 
 
430 
457 
887
Total 
48 
498 
600 
1,146
Source: British Business Bank analysis of PitchBook, Preqin and BBB MI data
38 BRITISH BUSINESS BANK
39
ANALYSIS OF UK VC FINANCIAL RETURNS
1.  Only LP funds which are classified as VC are included within this assessment.  
Growth Capital funds are not included within the British Business Bank and BPC 
figures to ensure an accurate and fair comparison to the wider VC market. To protect 
the commercial interests of the VC funds that the Bank has invested in, the Bank is 
not able to disclose the individual performance data of funds it has invested in.
2. BIS (2012) ‘SME access to external finance’ states ‘It is widely recognised that an 
‘equity gap’ exists in the provision of modest amounts of equity finance to SMEs. 
This is also due to asymmetric information between the investor and the business 
on the likely viability and profitability of the business.’
3. British Business Bank (2019) ’Future of Defined contributions pensions: Enabling 
access to Venture Capital and Growth Equity’  https://www.british-business-bank.
co.uk/wp-content/uploads/2019/09/Oliver-Wyman-British-Business-Bank-The-
Future-of-Defined-Contribution-Pensions.pdf
4. VC Adventure (2014) ‘Venture outcomes are even more skewed than you think’ 
https://www.sethlevine.com/archives/2014/08/venture-outcomes-are-even- 
more-skewed-than-you-think.html 
5. DealBook (2014) ‘In WhatsApp Deal, Sequoia Capital may make 50 times its money’ 
https://dealbook.nytimes.com/2014/02/20/in-whatsapp-deal-sequoia-capital-
may-make-50-times-its-money/ 
6. Nexit Ventures (2018) ‘Why VCs seek 10x returns’ https://www.nexitventures.com/
blog/vcs-seek-10x-returns/ 
7. Top Tier (2017) ‘The 80/20 Rule in Venture’ http://blog.ttcp.com/8020-rule-
venture/ 
8. Kaplan, S and Lerner, J. (2016) ‘Venture Capital Data: Opportunities and Challenges’ 
https://www.hbs.edu/faculty/Publication%20Files/17-012_10de1f93-30e4-4a98-
858c-4137556ec037.pdf 
9. Wealthfront (2014) ‘Demystifying Venture Capital Economics, Part 1’ https://blog.
wealthfront.com/venture-capital-economics/ 
10. Although secondary sales are possible, these usually occur at large discounts to the 
current valuation.
11. British Business Bank (2019) ‘Small Business Equity Tracker 2019’ https://www.
british-business-bank.co.uk/wp-content/uploads/2017/07/239-Small-Business-
Equity-Tracker-Report_2017WEB.pdf.
12. INSEAD (2011) ‘Value and Return Measurement in Private Equity: An Overview’ 
https://www.criticaleye.com/inspiring/insights-servfile.cfm?id=2842 
13. Mattermark (2016) ‘Everything You’ve Ever Wanted to Know About VC Returns 
(But Were Afraid to Ask’ https://mattermark.com/about-venture-capital-returns-
valuations/
14. There are several different methodologies used by VC firms to calculate the value of 
a company, including last round valuation, comparison with comparable companies 
and more recently the Option Pricing Model.  All of which can result in different 
valuations of the same company.  
15. Kaplan, S and Lerner, J. (2016) ‘Venture Capital Data: Opportunities and Challenges’ 
https://www.hbs.edu/faculty/Publication%20Files/17-012_10de1f93-30e4-4a98-
858c-4137556ec037.pdf
16. Mattermark (2016) ‘Everything You’ve Ever Wanted to Know About VC Returns 
(But Were Afraid to Ask) https://mattermark.com/about-venture-capital-returns-
valuations/
17. McKinsey and Company (2004) ‘Internal rate of return: A cautionary tale’ https://
www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-
insights/internal-rate-of-return-a-cautionary-tale 
ENDNOTES
18. Invest Europe (2018) ‘Professional Standards Handbook’ https://www.investeurope.
eu/media/710939/IE_Professional-Standards-Handbook-2018.pdf 
19. A £100 return at the beginning is treated the same as £100 return at the end of the 
fund’s life.
20. Fair Value is defined by US and International accounting standards as ‘the price 
that would be received to sell an asset or paid to transfer a liability in an Orderly 
Transaction between Market Participants at the Measurement Date.’  As quoted page 
7 of International Private Equity and Venture Capital Valuation (2015) http://www.
privateequityvaluation.com/download/i/mark_dl/u/4012990401/4632604968/
IPEV%20Valuation%20Guidelines%20December%202015%20-%20
updated%20for%20terms.pdf 
21. Medium (2016) ‘Why your investor might pass on your next fund:  An LP’s 
perspective on benchmarking in Venture Capital’ https://medium.com/sapphire-
ventures-perspectives/why-your-investor-might-pass-on-your-next-fund-
884dfc34f8d0 
22. For examples, see the CB Insights Downround tracker: https://www.cbinsights.com/
research-downround-tracker 
23. Ang and Sorensen (2012) ‘Risks, returns and optimal holdings of private equity: A 
survey of existing approaches’ https://papers.ssrn.com/sol3/papers.cfm?abstract_
id=2119849 
24. The Venture Company (2013) ‘How Top-Quartile runs out of merit’ https://www.
venturecompany.com/blog/2013/03/how-top-quartile-runs-out-of-merit/
25. https://www.bvca.co.uk/ 
26. BVCA (2018) ‘Performance Measurement Survey 2017’ https://www.bvca.co.uk/
Portals/0/Documents/Research/Industry%20Performance/BVCA-Perfomance-
Measurement-Survey-2017.pdf 
27. Kaplan, S and Lerner, J (2016) ‘Venture Capital Data: Opportunities and Challenges’ 
http://www.nber.org/papers/w22500
28. https://www.cambridgeassociates.com/who-we-serve/endowments-foundations/ 
29. British Business Bank analysis of PitchBook.
30. https://www.britishpatientcapital.co.uk/portfolio/ 
31. European Investment Fund (2017) ‘European Investment Fund Venture 
Capital Portfolio Performance – EIF own resources Vintage and Team 
Location:  As at 30/06/17’_https://ftalphaville-cdn.ft.com/wp-content/
uploads/2017/12/21152533/EIF-Own-Resources_VC-Performance-Data-by-
Vintage-and-Team-Location-as-at....pdf
32. https://www.crunchbase.com/ 
33. https://dealroom.co/ 
34. https://www.beauhurst.com/ 
35. BVCA (2018) ‘Performance Measurement Survey (PMS) 2017’ https://www.
bvca.co.uk/Portals/0/Documents/Research/Industry%20Performance/BVCA-
Perfomance-Measurement-Survey-2017.pdf 
36. Excluding British Business Bank invested funds.
37. The VC Catalyst programme started investing in funds in 2013.
38. The reported returns for the British Business Bank in Figure 1 and 2 relate to  
overall fund returns for the ECF funds and do not take into account the geared 
returns position for private investors. In practice, LPs will achieve higher returns 
 if funds perform well.
39. PitchBook and Preqin’s databases are continuously being updated.  
Since undertaking the analysis in August, the author is aware of data  
being corrected for one of the funds.
Legal Notices
British Business Bank plc is a public limited company registered in England and Wales registration number 08616013, registered office 
at Steel City House, West Street, Sheffield, S1 2GQ. As the holding company of the group operating under the trading name of British 
Business Bank, it is a development bank wholly owned by HM Government which is not authorised or regulated by the Prudential 
Regulation Authority (PRA) or the Financial Conduct Authority (FCA). It operates under its own trading name through a number of 
subsidiaries, one of these, Capital for Enterprise Fund Managers Limited, is authorised and regulated by the FCA (FRN 496977).  
British Business Bank plc and its subsidiary entities are not banking institutions and do not operate as such. A complete legal 
structure chart for British Business Bank plc and its subsidiaries can be found at www.british-business-bank.co.uk.
The British Business Bank has made every effort to use reliable, up to date and comprehensive information and analysis, but no 
representation, express or implied, is made by British Business Bank plc and its subsidiaries as to the completeness or accuracy of  
any facts or opinions contained in this report. Recipients should seek their own independent legal, financial, tax, accounting or 
regulatory advice before making any decision based on the information contained herein. This report is not investment advice. 
The British Business Bank accepts no liability for any loss arising from any action taken or refrained from as a result of information 
contained in this report.
This analysis and report was written by Dan van der Schans 
and Joel Connolly in the British Business Bank Economics 
Team.  We would like to thank David Woods in British Patient 
Capital for his assistance in reviewing and classifying the 
fund level data.
We are grateful to PitchBook and Preqin for allowing  
us the use of their data.
ACKNOWLEDGEMENTS 
40. These numbers will differ to the ones PitchBook and Preqin report themselves due 
to the additional data cleaning that the British Business Bank has undertaken, e.g. 
by removing ‘old’ fund data.
41.  Cambridge Associates (2019) ‘US Venture Capital Index and Selected Benchmark 
Statistics’ March 31, 2019 https://www.cambridgeassociates.com/private-
investment-benchmarks/
42. It is not possible to compare the European returns figures to Cambridge Associates 
or other data providers. Cambridge Associates does not publish data on the 
European VC market as it is included within other markets.
43. https://www.calpers.ca.gov/page/investments/asset-classes/private-equity/ 
pep-fund-performance 
44. Analysis of PitchBook confirms that the coverage of returns data for the Rest of 
Europe is lower than for the UK and US
45. This decline in coverage of US VC funds is also seen in the PitchBook data.
46. Kauffman report identifies several named fund managers that have previously 
declared they would not accept public capital investors into their funds to avoid 
publicly disclosing information on performance under FOI legislation.  Kauffman 
Foundation (2012) ‘”We have met the enemy… and he is us” Lessons from Twenty 
Years of the Kauffman Foundation’s Investments in Venture Capital Funds and The 
Triumph of Hope over Experience’ https://angel.co/pdf/kauffman-foundation-
venture-capital.pdf 
47. Ramos-Lynch (2018) ‘A Super Fast Overview and History of Tech VC’https://blog.
usejournal.com/a-super-fast-overview-and-history-of-tech-vc-714ae54ec72 
48. Gompers (1994) ‘The rise and fall of Venture Capital’ https://thebhc.org/sites/
default/files/beh/BEHprint/v023n2/p0001-p0026.pdf 
49. Preqin also captures the financial returns for European VC funds within these 
vintage years, but the number of funds captured per year is relatively small (less 
than 10) until 1997.
50. British Business Bank (2019) ‘Small Business Equity Tracker’
51. TechCrunch (2017) ‘The Meeting that showed me the truth about VCs’ https://
techcrunch.com/2017/06/01/the-meeting-that-showed-me-the-truth-about-
vcs/?renderMode=ie11 
52.  Medium (2016) ‘Why your investor might pass on your next fund:  An Lp’s 
perspective on benchmarking in Venture Capital’ https://medium.com/sapphire-
ventures-perspectives/why-your-investor-might-pass-on-your-next-fund-
884dfc34f8d0
53. Capital Dynamics (2009) ‘The PE J-curve: cash flow considerations from primary and 
secondary points of view’ https://www.capdyn.com/Customer-Content/www/news/
PDFs/the-private-equity-j-curve_private-equity-mathematics_apr-09__2_.pdf
54. The US economy went into recession in December 2007 with the bursting of 
the subprime mortgage bubble.  UK GDP growth turned negative in Q2 2008 and 
remained negative for 5 quarters before beginning to recover in 2010.
55. https://www.businessinsider.com/wework-ipo-timeline-delayed-ceo-adam-
neumann-scandals-explained-2019-9?r=US&IR=T#september-17-wework-bonds-
fell-at-a-record-pace-after-the-company-delayed-its-plan-to-go-public-18
56. The financial returns information covers fund performance as of end of March 2019 
in line with the figures contained in the BPC Annual Report.  However, the figures 
differ in terms of fund coverage.  Only the performance of LP funds classified as VC 
are included within the British Business Bank and BPC figures within this report. 
Growth Capital funds and listed vehicles are excluded to ensure an accurate comparison 
with the wider VC market.  Furthermore, performance is assessed for the fund, not 
just the returns received by the British Business Bank.  A fund vintage of up to 2016 
was chosen to ensure a meaningful comparison of market performance, as it is too 
soon to assess the performance of more recent vintage funds.  
57. To protect the commercial interests of the VC funds that the Bank has invested in, 
the Bank is not able to disclose the individual performance data of any of the funds 
that it has invested in.  
58. BIS (2009) ‘The supply of equity finance to SMEs:  Revisiting the “Equity Gap” http://
www.sqw.co.uk/files/8713/8712/1030/47.pdf 
59. https://www.british-business-bank.co.uk/wp-content/uploads/2019/05/BBB_ECF_
Investor_Workshop_Slide_Pack_May_2019_Final.pdf 
60. This covers LP funds classified as VC only.  Growth capital funds are excluded from 
these returns figures.
61. This includes funds invested in as part of the VC Catalyst programme.
62. British Business Bank (2019) ’Future of defined contributions pensions: Enabling 
access to Venture Capital and Growth Equity’  https://www.british-business-bank.
co.uk/wp-content/uploads/2019/09/Oliver-Wyman-British-Business-Bank-The-
Future-of-Defined-Contribution-Pensions.pdf
63. British Business Bank (2019) ‘Small Business Equity Tracker’ https://www.british-
business-bank.co.uk/wp-content/uploads/2019/06/Small-Business-Equity-
Tracker-2019.pdf 
64. British Business Bank analysis of Beauhurst show 69% of all equity deals above 
£10m between 2016-2018 involved an overseas equity investor.
65. British Business Bank analysis of PitchBook shows the average US VC fund was 
£160m in size compared to £123m (2016-2018 vintage, excluding funds less  
than £10m).
66. British Business Bank analysis of Preqin shows 10% of UK VC-backed companies 
received venture debt between 2016 and October 2019, compared to 15% of US 
VC-backed companies.
67. A pooled approach takes into account larger funds have a larger impact on the  
overall market financial returns.
68. This was undertaken by specific fund name and also visually to take into account 
variations of the same fund name.  E.g. use of Roman numerals and numbers, 
differences in plural e.g. partner and partners.  In some instances, abbreviations  
are used, e.g. SEP instead of Scottish Equity Partners and where possible these  
are taken into account. 
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