Both Sides of the Table

SEPTEMBER 15, 2022

IRRs work really well in a 12-year bull market but VCs have to make money in good markets and bad. We don’t want to compete for the largest AUM (assets under management) with the biggest firms in a race to build the “Goldman Sachs of VC” but it’s clear that this strategy has had success for some. It’s just math. So it’s about 20%.

Technical Review 416

Technical Review Pre-Money Valuation San Francisco Valuation 416

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

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. management fee).

IRR 116

IRR Metrics Valuation LP 116

David Teten

JANUARY 19, 2021

As two fund managers employing Flexible VC, we think it is a healthy addition to the ecosystem and will yield more predictable and stable healthy returns for investors. Too often, investment structures force the management team to make decisions between misaligned growth and investment (return) objectives. Early liquidity.

Cofounder 78

Cofounder Technical Review Equity Dividend 78

Tim Keane

JANUARY 12, 2010

Good investors use the valuation discussions to gauge the business savvy of the management team and to understand their ability to appreciate and deal with economic market forces that set values.   For individual angels and others investing their own money, this may be more fluid than for someone with responsibility for a managed fund.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Version One Ventures

SEPTEMBER 22, 2021

3x the invested capital net of fees over a period of about ten years for a net IRR in the low twenties). Note: TVPI stands for total value of investments net of fees / invested capital; DPI stands for distributions (= cash to LP’s) / invested capital). So, is 10x the new 3x ?

Venture Capital 201

Venture Capital IRR Private Equity Seed Stage 201

View from Seed

JULY 15, 2020

VC’s also manage multiple funds that get deployed over 10+ years, with new investments happening over the first 2-3 years of a fund’s life. 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