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%.
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.
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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.
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.
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.
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.
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.
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