US investors are increasingly choosing to gamble on venture capital funds rather than the more traditional stock exchange, say US financial analysts. According to one firm, Graystone Venture Partners, venture capital funds have beaten the US stock market by an average of two points a year over the past decade. Furthermore, another venture capital firm, Patricof & Co Ventures, has calculated that since 1983, the amount of venture capital under management has grown from $6bn to $50bn. The average net return to investors over the last five years has been 22% to 31%, says the company, although it warns that projections indicate that investors should not expect further similar returns in the near-term. While its potential for return is good, venture capital funding is a complex and high-risk area requiring considerable research expertise on the part of analysts, warn experts. And first-time investors in venture capital should consider diversifying their investments in a ‘fund of funds’ approach, rather than counting on the success of a single start-up firm.
