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May 14, 2024
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Small Venture Funds Outperform Large Funds

Energy Transition Ventures

As discussed in the recent article from Institutional Investor, a long history of data suggests that smaller funds outperform larger funds in venture capital, or likely more accurately, larger venture capital funds have a harder time delivering outsized returns, from factors well discussed in VC and LP circles.

Download the by vintage performance analysis of venture capital by fund sizes, or contact us for information on the full by vintage detailed venture capital performance benchmarking report.

But venture capital has been whipsawed by dramatically increasing fund sizes, volatile valuations, and increasing rounds sizes in 2021-2023, and challenging market conditions in 2023 to 2024, so a fair question remains, does the small venture capital fund premium still appear to hold?

Energy Transition Ventures analyzed VC performance vintages in the Preqin data set back to 2018, including by fund size. The fund size results, the subject of an upcoming Preqin First Close article, are pretty intriguing.

Over half the top decile was <$250 mm funds, 30% of the top decile was <=$100 mm. Zero >$1 billion mega funds were in the top decile.

Mega funds >$1 billion underperformed all other fund size buckets by Net IRR in 3 of 4 vintages.  Small funds <=$100 mm matched or outperformed all other fund size buckets in every vintage analyzed.  Mega funds >$1 billion underperformed all other fund size buckets by TVPI in 3 of 4 vintages.  Small funds <=$100 mm outperformed all other fund size buckets in 3 of 4 vintages analyzed.  The middle buckets displayed more mixed volatility of performance.

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About the Author
neal dikeman

Neal Dikeman

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Author Neal M. Dikeman is the Chairman of online network and cleantech think tank Cleantech.org, and a partner at early stage venture capital fund, Energy Transition Ventures. He has cofounded half a dozen cleantech and energy startups, previously worked in venture capital at Jane Capital Partners and Royal Dutch Shell. He has been one of the most prolific writers on the subject of cleantech, as chief blogger for Cleantechblog.com, named a 50 Best Business Blog by the London Times. He authored What is Cleantech?, the first brief history of the term cleantech, Cleantech.org, 2008, What is the Energy Transition? Cleantech.org, 2020, author of a book chapter on cap and trade in The Green Movement, Greenhaven Press, alongside George Will and John Kerry, and a former cleantech columnist for CNET/News.com, Christian Science Monitor, and Sustainable Industries Magazine.