Dark clouds still hang over the venture capital industry despite a slight improvement in initial public offerings and mergers & acquisitions. Cambridge Associates and the National Venture Capital Association today issued a report showing that 10-year returns -- perhaps the most important measurement of the industry --were a negative 3.7 percent for the period ending March 31.

Sources: Cambridge Associates, Dow Jones, Standard & Poor's, Thomson Datastream.

As shown in the chart above, VC returns for the 10-year timeframe were worse than the Dow Jones Industrial Average which was up 2.3 percent for that period. Venture returns still outperformed the Nasdaq, which was down 6.3 percent, according to the U.S. Venture Capital Index. But the negative returns over the 10-year period could cause trouble for venture firms as they contemplate raising more capital in 2011 or 2012.

It wasn't all bad news, and there's some evidence that the storm clouds may be breaking in the short term. One year returns swung positive in the venture business, up 6.5 percent. However, that was far below the blockbuster returns that investors saw in the public markets where the Nasdaq was up 56 percent and DJIA was up 47 percent. See chart below:

Peter Mooradian of Cambridge Associates believes the 10-year returns may have bottomed out, and he's suggesting positive results ahead.

"We continue to see a decline in the 10-year return number but believe it will bottom-out in the mid-negative single digits over the next two quarters," Mooradian said in a release. "Sustained improvement in the exit markets should result in the figure returning to breakeven or modestly positive territory in the second half of 2011."