NESTA released an interring report comparing the difference between US and UK venture Capital funds. It’s mostly grim reading as most VC funds gave struggled to produce much in the way of returns since the dot com era, but the report does identify early stage investing as a useful, if risky strategy.
Fund managers face several strategic choices that may impact fund performance, such as the number of companies to fund, the round at which to invest, the amount of initial funding to commit or whether to syndicate with other venture capitalists. We find that only one of these choices is significantly correlated with performance: funds investing in earlier rounds admittedly a more risky strategy, performed better than those investing in later rounds.
This is true both in the UK and the US. This relationship is also quite robust over time (albeit weaker in the earliest period). On average, making the first investments one round earlier is associated with 2.4 percentage points higher returns.