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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
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6 New Venture Realities To Target Your Funding Effort

Startup Professionals Musings

There is a rarified brand of successful investors who can show average IRRs of 25 percent or greater over the years. Thus every serious investor reserves a certain amount of his investment capital for follow-on rounds, which allows them to stay to course to success, even with dilution.

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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. It’s just math. No blog post about how Tiger is crushing everybody because it’s deploying all its capital in 1-year while “suckers” are investing over 3-years can change this reality.

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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
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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
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How’s Venture Capital Changing in 2023

VC Cafe

IRR (on average) over a 15-year horizon, Venture continues to outperform other long-term asset classes. Founders would be wise to take advantage of their key benefits of being a startup: speed and innovation. Eze Vidra, Remagine Ventures Venture remains attractive but LPs have been burnt With a 11.5%

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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