Local VC Benchmarks: When to Use Them

Local VC benchmarks help US investors evaluate venture capital fund performance by focusing on regional factors like market conditions, regulations, and exit opportunities. Unlike global benchmarks, which mix data from diverse regions, local benchmarks offer a more accurate view of how funds perform within the US ecosystem.

Key Takeaways:

Why Local Benchmarks Matter: US funds often face unique conditions (e.g., regulatory frameworks, exit markets) that global metrics fail to capture.
Global Benchmark Limitations: Differences in sectors, funding stages, currency, and reporting standards often distort comparisons.
When to Use Local Benchmarks: For US-focused funds, local data is better suited for evaluating performance due to regional investment patterns, state-specific laws, and mature exit markets.
How to Apply Them: Use reliable local data, compare funds within similar regions and sectors, and update benchmarks quarterly.

By focusing on local benchmarks, US investors can make better-informed decisions and align strategies with the realities of their market.

Problems with Global VC Benchmarks

Global benchmarks often fail to provide an accurate picture for US investors because they combine data from markets with vastly different conditions. This blending can lead to misleading performance evaluations and poor investment decisions. Let’s break down the key areas where these benchmarks fall short for US-focused evaluations.

Regional Market Differences

Economic conditions vary widely across regions, making it difficult to draw meaningful comparisons for US ventures. The US market, with its maturity and unique characteristics, behaves very differently from emerging markets or even established European ecosystems.

For example, market liquidity in the US benefits from multiple exit options, including NASDAQ, NYSE, and an active mergers and acquisitions (M&A) landscape. These factors enable quicker liquidity events and shorter return timelines. In contrast, markets in Southeast Asia or Latin America often experience slower exits due to underdeveloped public markets.

Regulatory environments also play a major role. US companies operate within a stable framework, while businesses in regions with evolving regulations face different risks and compliance costs, which global benchmarks fail to account for.

Additionally, the cost of capital varies between regions. Differences in interest rates, inflation, and currency stability mean that a fund in a high-inflation environment might show strong nominal returns. However, when adjusted for local economic conditions, those returns might not hold up. This makes global benchmarks unreliable for comparing real performance.

Sector and Stage Mismatches

Global benchmarks often combine data from different sectors and investment stages, creating a muddled picture for US investors. The industry concentration in specific regions skews comparisons and makes it hard to evaluate performance against realistic peer groups.

Take the technology sector as an example. The US leads in enterprise software and consumer tech, with established hubs like Silicon Valley, Austin, and Boston. Comparing a US tech fund’s performance to global averages, which might include industrial investments in Germany or commodity-focused funds in Australia, offers little practical insight.

Another example is biotech and life sciences, where the US enjoys distinct advantages like FDA approval pathways, world-class research institutions, and concentrated expertise in regions like Boston and San Francisco. A US biotech fund measured against global averages - including regions lacking such infrastructure - creates an incomplete and misleading picture.

Stage-specific differences also complicate comparisons. Variations in how funding stages transition across regions can distort internal rate of return (IRR) calculations, making it hard to draw direct comparisons between funds at similar stages of development.

Currency and Reporting Problems

Currency fluctuations and reporting inconsistencies add another layer of complexity to global benchmarks. Currency movements can distort comparisons, especially during periods of dollar strength or weakness. For instance, a European fund might show strong euro returns, but those returns could appear weaker when converted to US dollars.

Accounting standards further complicate matters. US funds typically follow Generally Accepted Accounting Principles (GAAP), while many European funds use International Financial Reporting Standards (IFRS). These differences in valuation methods, especially for unrealized investments, can create performance gaps that reflect accounting methods rather than actual investment outcomes.

Reporting practices also vary. US funds are subject to stricter disclosure requirements and more frequent reporting to limited partners, unlike funds in some other regions. These differences can lead to timing mismatches in how gains and losses are recognized, making global comparisons unreliable.

Lastly, tax treatment differs significantly across regions. US funds often benefit from favorable long-term capital gains treatment, while other jurisdictions may impose tax structures that reduce net returns. Global benchmarks frequently overlook these differences, which can lead to underestimating the true risk-adjusted returns of US funds.

In short, these inconsistencies - whether in currency, reporting, or taxation - can make a fund’s performance look mediocre in global benchmarks, even when it’s delivering strong returns by local standards and economic realities.

When to Use Local VC Benchmarks

Knowing when to apply local benchmarks is key to accurately evaluating performance. For US investors and fund managers, incorporating a US-specific lens helps reveal the true dynamics of the market and provides a clearer picture of investment scenarios.

The US market has unique characteristics that require benchmarks tailored to local investment behaviors, regulatory environments, and exit opportunities.

Regional Investment Patterns

Venture capital activity in the US is heavily concentrated in specific regions, creating distinct investment patterns that global benchmarks may fail to capture. Take Silicon Valley, for instance - it’s not just a hub for innovation but also a hotspot for venture capital, with dense networks of entrepreneurs and follow-on investors. Funds operating in areas like Silicon Valley or Boston often show dynamics that are unique to these ecosystems.

Regional specialization further complicates broad comparisons. A fund focused on Boston's biotech corridor, for example, will likely encounter deal flow, pricing, and exit trends that look very different from those in other parts of the country - or the world.

These regional patterns set the stage for understanding how legal and regulatory factors further shape the need for localized benchmarks.

Legal and Regulatory Factors

State-specific regulations and incentives in the US play a significant role in shaping fund performance, making local benchmarks essential. For example, Delaware’s business-friendly incorporation laws and California’s stock option regulations can directly impact returns in ways that global benchmarks simply don’t reflect. Tax incentives, like those tied to Opportunity Zone investments, add another layer of complexity that’s unique to the US.

The country’s mature regulatory environment, including well-defined securities laws, also contributes to more predictable exit timelines and valuation processes compared to emerging markets. On top of that, state-specific investor networks and institutions - like CalPERS - further influence capital availability and investment terms, underscoring the importance of localized analysis.

But the story doesn’t end with regulations - exit markets also play a major role in differentiating US venture capital performance.

Exit Markets and Deal Sizes

US exit markets offer distinct advantages, making local benchmarks even more relevant. Major exchanges like NASDAQ and NYSE provide liquidity options that support faster, more predictable exit strategies. Deal sizes in the US often diverge from global patterns, reflecting differences in capital intensity and growth expectations.

The US M&A landscape also frequently delivers premium exit opportunities. Domestic acquirers actively seek out venture-backed companies, while the US IPO market tends to reward high-growth startups, even if they’re not yet profitable. This tolerance for growth-focused companies often results in higher exit multiples compared to more conservative international markets.

Advisors like Phoenix Strategy Group help growth-stage companies navigate these regional advantages, ensuring they’re well-positioned for exits within the US ecosystem.

For US investors, understanding these regional trends, legal frameworks, and exit market dynamics is essential when selecting the right performance benchmarks.

How to Use Local VC Benchmarks

Understanding why local benchmarks are essential is just the beginning - knowing how to apply them is where the real value lies. Using local VC benchmarks effectively requires reliable regional data, thoughtfully chosen peer groups, and expert analysis to truly evaluate fund performance. The goal is to measure performance within the context of your specific market.

Finding Regional VC Data

The first step is gathering trustworthy local data. This is the backbone of any meaningful benchmark analysis. Local industry reports and state-level agencies are great places to start. For example, state economic development agencies often publish reports on venture capital activity in their regions. These reports typically highlight local tax incentives, regulatory factors, and other conditions that directly affect fund performance. Once you’ve secured this data, the next move is to create peer group comparisons.

Building Peer Group Comparisons

To get accurate benchmarks, you need to compare funds with similar geographic focuses and investment strategies. For instance, a biotech fund in Boston should benchmark itself against other life sciences investors in the Northeast, not against funds operating in unrelated regions. Factors like investment stage, deal size, and fund vintage are equally important. These elements ensure you’re evaluating comparable market conditions and exit opportunities. However, to interpret this data and refine your strategy, expert guidance is indispensable.

Working with Financial Advisors

This is where financial advisors come into play - they turn raw benchmark data into actionable strategies. Advisors can help growth-stage companies monitor key performance indicators (KPIs), build integrated financial models, and navigate the complexities of fundraising. As J.P. Morgan explains:

The role of the venture capitalist or investor is to help the founders of a startup succeed. This can take many forms, but it usually boils down to advising on things like the state of the industry, achieving commercialization and benchmarking to peers.

With a founder's time often stretched, venture capitalists who advocate for and market a startup to their networks can be a big help.

J.P. Morgan

Take firms like Phoenix Strategy Group as an example. Their expertise in financial planning and analysis (FP&A) services and KPI development equips companies to focus on critical metrics like customer acquisition cost, customer lifetime value, and revenue growth. These metrics are essential for meaningful benchmark comparisons. Additionally, advisors can streamline the often months-long fundraising process by leveraging their networks and industry knowledge. They also assist in decoding complex term sheets and valuation methods, ensuring that regional market dynamics are accurately factored into performance evaluations.

Best Practices for Local Benchmarks

Implementing local benchmarks effectively requires a disciplined approach and consistent processes. By sticking to a reliable methodology, you can transform raw local data into actionable insights, directly addressing earlier challenges and aligning them with practical solutions.

Updating Benchmarks Regularly

Market conditions can shift quickly, so keeping your benchmarks up to date is crucial. A quarterly update schedule ensures your performance assessments reflect the latest changes in interest rates, regulations, and other economic factors that influence local markets.

Set a fixed schedule for quarterly updates, aiming to refresh your data within 30 days after the quarter ends. This timing allows you to incorporate the most recent market activity while maintaining a steady reporting rhythm. State-level reports, which are typically available 45 to 60 days post-quarter, can further refine your analysis.

Tracking these updates over time reveals trends unique to your local market. For example, a fund operating in the Pacific Northwest might observe seasonal fluctuations that differ from those in the Southeast. Consistent updates make these regional patterns more apparent and actionable.

Combining Local and Global Data

For the most effective benchmarking, use local data as your primary focus, while integrating global metrics for context. This two-tiered approach helps you evaluate your position within your regional market and understand how your local performance stacks up against global trends.

Start by anchoring your analysis in local benchmarks, as they represent your immediate competitive environment. For instance, a biotech fund in Boston should compare itself primarily to other life sciences investors in the Northeast. Once you’ve established this foundation, layer in global biotech performance metrics to determine whether any regional underperformance stems from local issues or broader industry trends.

Aim to base 70-80% of your evaluation on local data, using global data only for additional context. This balance keeps your benchmarks realistic and grounded while still offering insights into international best practices. Be mindful of currency impacts when merging datasets - local benchmarks naturally account for regional economic conditions, while global data might obscure these nuances. Always convert global figures to US dollars using consistent exchange rates, and clearly document your conversion methods for transparency.

Standard Reporting Methods

Consistency in reporting builds trust and eliminates confusion. Use standardized templates for all benchmark reports, including details like data sources, calculation methods, and update schedules. This uniformity is especially important when presenting to investors who may be comparing your performance to other funds with different benchmarking approaches.

Stick to US formatting standards - dates in MM/DD/YYYY format, dollar amounts with the "$" symbol, and percentages rounded to one decimal place - for maximum clarity.

Clearly document your benchmark criteria in every report. Specify the geographic boundaries, sector focus, fund vintage years, and minimum deal sizes used to define your peer group. Transparency like this helps investors understand your benchmarks and fosters confidence in your analysis.

Separate local and global comparisons into distinct sections within your reports, clearly labeling the sources and methods for each dataset. This structure ensures readers can easily focus on the most relevant information. Many companies, especially those working with advisory firms like Phoenix Strategy Group, benefit from automated models that produce consistent, well-organized reports. These tools not only enhance credibility but also reduce the administrative workload for internal teams.

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Conclusion: Key Points on Local VC Benchmarks

Local venture capital (VC) benchmarks tackle the gaps that global metrics often leave behind. When regional factors like market conditions, regulatory frameworks, or exit opportunities differ from international norms, these benchmarks offer the precision needed to evaluate performance accurately.

The value of local benchmarks becomes especially clear when considering regional investment nuances, currency shifts, and sector-specific trends. Take Boston's biotech funds and London's fintech funds as an example - they operate in entirely different ecosystems, requiring tailored benchmarks. Relying solely on global metrics can obscure these critical distinctions, leading to potentially flawed strategic choices.

Regular updates - ideally on a quarterly basis - and combining local data with global insights ensure more accurate performance evaluations. Standardized reporting also plays a key role in building trust with investors, while making methodologies more transparent.

Advanced financial tools like PME (Public Market Equivalent) and CAPM (Capital Asset Pricing Model) alpha are essential for effective local benchmarking. For example, in 2025, Phoenix Strategy Group's models reported impressive results: 38% annualized VC returns and a CAPM alpha of 32.14%, showing that VC investments can outperform public markets nearly half the time[1].

For firms looking to adopt or refine local benchmarking strategies, Phoenix Strategy Group offers the expertise to make it happen. Their capabilities in FP&A systems, data engineering, and advanced financial modeling equip funds with the tools they need to build and sustain effective benchmarks that lead to smarter investment decisions.

By embracing local benchmarks, US-focused funds can achieve more precise evaluations, improve investor communication, and gain sharper strategic insights - all of which are essential for navigating the complexities of regional market dynamics.

[1] Qubit Capital, "Venture Capital Benchmark Returns: 2025 Insights & Success", June 12, 2025.

FAQs

Why are local VC benchmarks often more reliable for assessing fund performance than global ones?

Why Local Venture Capital Benchmarks Matter

Local venture capital benchmarks provide a clearer lens into the unique economic, regulatory, and market conditions of a specific region. Unlike global benchmarks, which might overlook nuances, these localized metrics capture the pulse of regional startup ecosystems, valuation patterns, and investment opportunities.

By relying on this localized data, investors and fund managers can make more informed decisions. It allows them to evaluate performance more accurately and craft strategies that align with the specific dynamics of their target markets. This tailored approach often leads to smarter investments and a deeper understanding of the local landscape.

What regional factors should U.S. investors consider when using local venture capital benchmarks?

When using local venture capital (VC) benchmarks, U.S. investors need to take into account regional market maturity, sector-specific trends, and local economic conditions. These factors play a critical role in shaping investment outcomes and often provide a clearer picture than relying on global benchmarks alone.

It's also important to examine the geographic concentration of VC-backed companies and the success rates within specific regions. These insights reveal the distinctive characteristics of local markets, helping investors tailor their strategies to better match the opportunities and risks unique to each area.

When should US-based venture funds use local benchmarks instead of global ones for performance evaluation?

Evaluating Performance with Local and Global Benchmarks

Venture funds based in the United States should rely on local benchmarks to assess performance within the unique dynamics of the U.S. market. Factors like industry trends, funding patterns, and the nation's economic conditions play a significant role in shaping the investment landscape. Using these benchmarks helps funds gauge how they stack up against peers operating in the same environment.

That said, incorporating global data is equally important. It offers a broader view of market trends, uncovers potential opportunities, and highlights risks that could influence long-term strategies. By blending localized insights with global benchmarks, funds can craft a more comprehensive performance evaluation, balancing regional specifics with worldwide market influences.