article thumbnail

IRR is a vanity metric

VC Adventure

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
article thumbnail

What Does the Post Crash VC Market Look Like?

Both Sides of the Table

IRRs work really well in a 12-year bull market but VCs have to make money in good markets and bad. For Upfront Ventures, across > 25 years of investing in any given fund 5–8 investments will return more than 80% of all distributions and it’s generally out of 30–40 investments. It’s just math. So it’s about 20%.

Insiders

Sign Up for our Newsletter

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

article thumbnail

How is the VC Asset Class Doing?

View from Seed

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
article thumbnail

10 Reflections After 10 Years of NextView

View from Seed

One industry specific example is the strange fascination among some LPs and GPs around term IRR. Even though everyone knows that VC funds take 10+ years to come to fruition, one often can’t help but benchmark themselves based on IRR in the early days.

IRR 205
article thumbnail

10 Reflections After 10 Years of NextView

View from Seed

One industry specific example is the strange fascination among some LPs and GPs around term IRR. Even though everyone knows that VC funds take 10+ years to come to fruition, one often can’t help but benchmark themselves based on IRR in the early days.

IRR 156
article thumbnail

10 Reflections After 10 Years of NextView

View from Seed

One industry specific example is the strange fascination among some LPs and GPs around term IRR. Even though everyone knows that VC funds take 10+ years to come to fruition, one often can’t help but benchmark themselves based on IRR in the early days.

IRR 136
article thumbnail

Resetting venture capital return expectations: is 10x the new 3x?

Version One Ventures

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). The chart below shows the numbers as of June 30, 2021. . .