Does Venture Capital Pay? New Evidence on an Old Question

Using a novel set of risk benchmarks, the author analyzes the performance of U.S. venture capital. Findings show, over the long term, that venture capitalists have achieved a risk‐adjusted return of 5.16%. In stark contrast, their passive capital providers have pocketed a dismal, close‐to‐nil return on venture capital. The author suggests a method to solve this imbalance—a practical way for passive investors to negotiate a fairer split of returns with venture capitalists. © 2015 Wiley Periodicals, Inc.