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  • December 2010
  • Background Note
  • HBS Case Collection

Risk and Reward in Venture Capital

By: William A. Sahlman
  • Format:Print
  • | Pages:37
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Abstract

This note describes the payoff structure of investment in individual venture capital–backed companies and in venture capital portfolios. Venture Capital investments are characterized by high failure rate (0ver 50%) and a small number of given successes (greater than 10% returns). As an asset, class, venture capital has produced high cyclical returns that mirror trends in capital markets and in markets for new technology. There is a large disparity in median and upper quantize performance. A small number of funds do well on a constant basis. Overall returns on venture capital have been low for the decade ending in 2009. ?????

Keywords

Capital Markets; Venture Capital; Investment Return; Investment Portfolio; Data And Data Sets; Failure; Performance; Technology

Citation

Sahlman, William A. "Risk and Reward in Venture Capital." Harvard Business School Background Note 811-036, December 2010.
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About The Author

William A. Sahlman

Entrepreneurial Management
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  • Guild Education: Unlocking Opportunity for America's Workforce By: William A. Sahlman, Michael D. Smith, Nicole Tempest Keller and Alpana Thapar
  • 1366 Technologies: Surviving in a Fast Changing World By: Jurgen Weiss, William A. Sahlman and Joseph B. Lassiter III
  • Khan Academy 2018 (Abridged) By: William A. Sahlman and Nicole Tempest Keller
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