Ten years after the extraordinary increase in funds managed by members of the National Venture Capital Association, capital is being withdrawn from the sector in the context of a decade of relatively poor investment returns. To provide perspective, I consider four canonical facts about venture capital returns: the extreme cross-sectional skew in returns, the persistence of returns, the dependence of returns upon the state of the IPO market, and the concentration of superior returns in the ICT sector. The first three of these have been addressed in the academic literate; I will provide additional evidence from my own research. I will devote much of the lecture to the fourth fact, which has attracted relatively little attention by scholars. I suggest that a critical factor was the post-World War II government investment in the scientific research and technology development that enabled the "digital revolution", critically augmented by the government's role as customer of the nascent micro-electronic and computer industries.
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About the speaker:
William H. Janeway is Senior Advisor at Warburg Pincus. Dr. Janeway received his doctorate in economics from Cambridge University where he was a Marshall Scholar. He was valedictorian of the class of 1965 at Princeton University. Prior to joining Warburg Pincus in 1988, where he was responsible for building the information technology practice, he was executive vice president and director at Eberstadt Fleming. Dr. Janeway is a director of Nuance Communications,O'Reilly Media, and Wall Street Systems and a member of the Board of Managers of Roubini Global Economics. He is also Chairman of the Board of Trustees of Cambridge in America, University of Cambridge and Co-Chair of Cambridge’s 800th Anniversary Capital Campaign, and a Founder Member of the Board of Managers of the Cambridge Endowment for Research in Finance (CERF). Dr. Janeway is a member of the board of directors of the Social Science Research Council and of the Advisory Boards of the Princeton Bendheim Center for Finance and the MIT-Sloan Finance Group. He is also a member of the Board of Governors of the Institute for New Economic Thinking.
William H. Janeway