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High Returns On A Small Fund Challenge Low Returns On A Big Fund

David Teten

Assuming you have a large amount of capital to invest, the relatively easy decision is to invest in one of the brand-name, multi-billion dollar VCs. He surmises that LPs aren’t buying the argument that large funds don’t perform. But why would any LP ever drop out of such a fund?

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It’s Morning in Venture Capital

Both Sides of the Table

Thomson Reuters data shows that around $10 billion of LP money went into VCs per year pre bubble. By 2000 the total LP commitments had mushroomed to more than $100 billion. LP contributions to VC firms shrunk from 2000 and by 2005-2008 had stabilized to around $30 billion per year. The Funding Problem.

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On the Road to Recap:

abovethecrowd.com

In 1999, record valuations coexisted with record IPOs and shareholder liquidity. If 1999 was a wet (read liquid) bubble, 2015 was a particularly dry one. They are likely sitting on amazing paper-based gains that have already been recorded as a success by their own investors — the LPs. 2015 was the exact opposite.

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