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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. management fee).

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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. We don’t want to compete for the largest AUM (assets under management) with the biggest firms in a race to build the “Goldman Sachs of VC” but it’s clear that this strategy has had success for some. It’s just math. So it’s about 20%.

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How’s Venture Capital Changing in 2023

VC Cafe

By contrast, they backed 620 funds in the last three months of 2021 First time fund managers hit hard: In 2022, limited partners backed 141 funds run by first-time managers, a 59% decline from the prior year and the lowest number since 2013 How does the constrained LP environment manifest for funds and startups?

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How is the VC Asset Class Doing?

View from Seed

The longer the portfolio maintains the same value without distributing back cash, the worse the fund’s ultimate IRR. This equates to something in the neighborhood of a 10% IRR, which isn’t great given the illiquidity of the asset class and strength of the public markets. Most LPs are trying to manage some targeted asset allocation.

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Flexible VC, a New Model for Companies Targeting Profitability

David Teten

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. Early liquidity.

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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). Our returns are obviously very good, but in no way unique in today’s venture markets, especially among emerging managers that invest at the seed stage. So, is 10x the new 3x ?

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Fundraising Hacks for Venture Capital and Private Equity Funds

David Teten

A few years ago, I presented at an Invesco conference on Emerging GPs, and one of the highlights was a presentation by Laurie Weir summarizing CALPERS’ selection criteria under their Private Equity Emerging Manager Program Review. Denis Tse: Fund Management Craftsmanship: An LP’s Food for Thought for Emerging VC General Partners.