Dow Jones Indexes, a leading global index provider and a CME Group company, today announced the launch of the Dow Jones US Venture Capital Index, designed to measure changes in the market value of venture capital-financed companies in the United States.
The new index has been licensed to Chicago Alternative Investment Partners, LLC to serve as a basis for financial products.
"This index tracks an asset class that has not been readily available before to the general public," said Michael A. Petronella, president, Dow Jones Indexes. "By publishing this index, we intend to shed light on this dynamic market and offer investors access to information in this important segment of U.S. economic growth," noted Petronella.
The methodology for the Dow Jones U.S. Venture Capital Index was developed by Dow Jones Indexes together with Sand Hill Econometrics. The values are based on a combination of values reported to Dow Jones VentureSource and value estimates based on Sand Hill's previously developed econometric methods for estimating company values when a recent market value is not readily available. Dow Jones VentureSource database is owned by Dow Jones & Company, Inc.
The selection universe for the Dow Jones U.S. Venture Capital Index is based on companies in the Dow Jones VentureSource database, the world's most comprehensive venture capital database which tracks more than 14,000 private investment firms and more than 48,000 venture-backed companies in all industries and stages of development, worldwide. The index is based on data from Dow Jones VentureSource, about companies headquartered in the United States that have received equity funding from institutional venture capital funds. Excluded from the index are companies that receive funding solely from "angels," affluent private investors, or leveraged buyout funds.
"Even as we began building a venture index in 2001, I knew it was important to collaborate with a big-name index provider and to use a source with high quality data. Dow Jones Indexes and the Dow Jones VentureSource database were the first, obvious, and ultimate choices," said Susan Woodward, an economist and the founder of Sand Hill Econometrics. "It's a great time to launch. We look forward to coming out with additional indexes built from this data," added Woodward.
The Dow Jones Venture Capital Index was first published on March 31, 2010. At the end of the first quarter of 2010, the index value was 1605.98, more than double the recent low of 762.43 at the end of February 2009, based on back-tested data. The back-tested data shows that the index has annualized performance of 16.43% since the end of 1991, before expenses and fees.
Component companies enter the index when they get a first round of venture funding. They are removed from the index when they are acquired; merge with another company; make an initial public offering (IPO), or go out of business. The index is market-value weighted and will be reviewed quarterly.
The Dow Jones U.S. Venture Capital Index is calculated in U.S. dollars and will be published quarterly, as funding events are usually reported at the end of calendar quarters, on a one-quarter delayed basis. Index values for intervening months also will be published quarterly. Index values for April, May and June of this year will be published in mid-November. Calculation of the index began on March 31, 2010. Estimated monthly back-tested history is available back to December 31, 1991.
As of March 31, 2010, there were more than 7,000 components in the Dow Jones U.S. Venture Capital Index, up 4.6% from December 31, 2009.
The Dow Jones U.S. Venture Capital Index was first published on March 31, 2010. All estimated daily historical closing prices prior to that date are based on back-testing (i.e., calculations of how the index might have performed in the past if it had existed). Back tested performance information is purely hypothetical and is solely for informational purposes. Back tested performance does not represent actual performance, and past performance is not indicative of future results.