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. But it will be patiently deployed, waiting for a cohort of founders who aren’t artificially clinging to 2021 valuation metrics. But I thought a better way of thinking about how we manage our portfolios is to think about it as a funnel.

Technical Review 416

Technical Review Pre-Money Valuation San Francisco Valuation 416

View from Seed

DECEMBER 4, 2019

At the time, I spent most of my time describing the metrics themselves and how VCs and their LPs evaluate performance based on these measurements. If you aren’t familiar with these metrics, I recommend reading the original post to get a sense of the numbers that I’ll be reviewing here. So, is this good or bad? LP Constraints.

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.

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. Flexible VC 102: Variations.

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

David Teten

MARCH 2, 2013

The Kauffman Foundation points out several reasons why they choose to keep pouring capital into the industry: the J-curve narrative, VC investment allocation mandates (which should disproportionally benefit large funds), the “relationship business” philosophy, and potentially misleading return metrics (such as IRR).

LP 114

LP Securities and Exchange Commission Silicon Valley Venture Capital 114

Steve Blank

MARCH 31, 2014

But the world you lead will be much different from the one your professors knew or your predecessors managed. Yet in the face of all this change, traditional firms continue to embrace a management ethos that values efficiency over innovation. To manage these employees companies create metrics to control, measure and reward execution.

Private Equity 330

Private Equity Metrics China Intellectual Property 330