Warburg-Pincus Senior Adviser Bill Janeway told Forbes Contributor Igor Stenmark in an interview that the venture capital industry is "contracting."
The tech investor who once served as the Vice-Chairman of Warburg-Pincus and took care of the company's entire technology practice from the early eighties to 2006 saw a fall not only in the capital managed by venture capital firms but in the number of venture capital companies as well.
Janeway told Stenmark, "The capital under management by venture capital firms, and the number of venture capital firms, are both declining from the absurd and unsupportable spike of the end of dot.com bubble. Then the amount of money committed to venture capital firms went from order of magnitude of $10 billion in 1995 to a $105 billion in the year 2000 - that's a $140 billion in today's terms."
Janeway, who also teaches at Cambridge and Princeton, said that this decline also represented a shift in the returns that venture capital firms have posted since 2000 to 2001. He noted that until the year 2000, the venture capital returns had outperformed the Nasdaq index. From 2000, however, these returns have lagged behind the Nasdaq.
Commenting on the data, Janeway said this may not be important considering that the speculative market was largely closed then. However, he noted, "There have been obviously some highly visible major IPOs and a modest recovery in the number of IPOs in the last few quarters, but in general, since 2001, the IPO market has been running at a rate below where it ran for almost 20 years from 1982 to 2001. Put it this way, - what we think of the venture capital industry was built on the back of the greatest bull market in the history of capitalism and that bull market came to a speculative peak in 2000-2001."
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