Both Sides of the Table

SEPTEMBER 15, 2022

This happens slowly because while public markets trade daily and prices then adjust instantly, private markets don’t get reset until follow-on financing rounds happen which can take 6–24 months. IRRs work really well in a 12-year bull market but VCs have to make money in good markets and bad. It’s just math. So it’s about 20%.

Technical Review 416

Technical Review Pre-Money Valuation San Francisco Valuation 416

VC Adventure

MAY 5, 2022

I’m observing that IRR is a metric that is becoming an increasing focus in venture, replacing fund return multiple as the key metric of success. I understand the draw of IRR, and – as a fund draws to a close – there’s no question it’s an important metric. Recycling hurts IRR. This is a mistake.

IRR 116

IRR Metrics Valuation LP 116

View from Seed

DECEMBER 4, 2019

The top quartile has distributed 2.03x (vs. 1.68) and the median fund now has distributed 1.27X (vs. The longer the portfolio maintains the same value without distributing back cash, the worse the fund’s ultimate IRR. Based on that metric, the top quartile fund has now distributed 2.03X after 12 years.

LP 256

LP IRR Distribution Portfolio 256

David Teten

JANUARY 19, 2021

Flexible VC creates early liquidity which can be either reinvested or distributed to LPs. Part of the magic of revenue-based financing is how historical performance and strong, achievable financial projections are ultimately the backbone of how RBI/RBF investment decisions are made.” 20-30% is a common target IRR for investors.

Cofounder 78

Cofounder Technical Review Equity Dividend 78

View from Seed

JULY 15, 2020

Many of these companies are probably valued at their last financing round, which probably occurred in a very frothy funding environment. This may not hurt the ultimate exit value of these companies, but the passage of time will hurt the fund’s ultimate IRR. Unevenly distributed, but broadly optimistic. Reshuffling the deck.

Portfolio 215

Portfolio IRR Dilution Distribution 215

Steve Blank

MARCH 31, 2014

Cheered on by finance professors, Wall Street analysts, investors and hedge funds, companies have learned how to make metrics like Internal Rate of Return look great by one; outsourcing everything, two, getting assets off their balance sheet, and three only investing in things that pay off fast.

Private Equity 330

Private Equity Metrics China Intellectual Property 330

VC Adventure

AUGUST 12, 2014

It’s a generalization but one that’s pretty well accepted in venture circles and it’s how many VCs describe target fund distribution, myself included. Correlation Ventures just released a study that shows the distribution of outcomes across over 21,000 financings and spanning the years 20014-2013. Actually no.

IRR 133

IRR Portfolio Distribution Venture Capital 133