David Teten

MAY 16, 2017

Historically, the process of winning capital from limited partners has been opaque. LIMITED PARTNERS’ PERSPECTIVE. As an idea of how high the bar is for a GP, he says , “I dove into our fund log from the last couple of quarters and found that the mean IRR (among VCs listing one) was over 36%.” ” .

Private Equity 60

Private Equity Venture Capital Technical Review Equity 60

VC Adventure

OCTOBER 5, 2020

Ian Hathaway, who recently co-authored the second edition of Startup Communities with my partner, Brad, sent me the chart below which highlights how that translates to returns in venture capital as an asset class. Taking the most aggressive end of these numbers would still only have this one company returning 70% of the fund’s capital.

IRR 174

IRR Venture Capital Community Partner 174

Steve Blank

MARCH 31, 2014

Unfortunately as we’ve learned from recent experience, using Return on Net Assets and IRR as proxies for efficiency and execution won’t save a company when their industry encounters creative disruption. Today billions of dollars that companies could have invested in innovation are sitting in the hands of private equity funds.

Private Equity 325

Private Equity Metrics China Intellectual Property 325

David Teten

SEPTEMBER 16, 2014

Based on his track record, by 2008 he was able to found ff Venture Capital , an institutional angel investment firm (where I am a Partner). Average Angel Returns Over Time. Time Period. Total Investments. Exited Investments. 1994 – present. Band of Angels Website FAQ. Sohl: “The Angel Investor Market in 2011: The Recovery Continues”.

Angel Investor 114

Angel Investor Technical Review Venture Capital Pre-Money Valuation 114

Both Sides of the Table

OCTOBER 17, 2019

The first check I wrote was just over 10 years ago into a company called Invoca who just announced a new $56 million in funding led by Scott Hilleboe at HIG Growth Partners. It proved to be fortuitous because it allowed me the time & space I needed to get to know tons of founders and VCs and to hone my craft. Over the past 2.5

IP 223

IP Intellectual Property IRR Cofounder 223

Both Sides of the Table

MAY 19, 2018

Or if you’re a VC raising from LPs you have to list all of your deals, your investment value, your carrying value, your multiples, your IRRs, TVPIs, DPIs, etc along with net cashflows plus your previous LPAs. These collective sets of documents form the basis of what somebody looking at investing would call “financial due diligence.”

Cap Table 336

Cap Table Due Diligence Forecast Churn Rate 336

Hippoland

NOVEMBER 13, 2016

A common intermediary milestone for most investors is IRR (internal rate of return) of the fund. So there are a lot of unrealized gains built into the IRR of an early fund. Furthermore, we’ve established that companies don’t get credit for revenue — this does not get factored into IRR calculations. Let’s take this one last step.

IRR 48

IRR Valuation Portfolio Due Diligence 48

VC Adventure

AUGUST 12, 2014

The resulting fund would have an IRR in the range of 10% (the exact IRR would depend on the timing of the cash flows, but I constructed a few models to approximate this and 10% was the average return). That’s hardly something to write home about and underscores the challenge of being “average” in this industry.

IRR 133

IRR Portfolio Distribution Venture Capital 133

David Teten

JANUARY 28, 2013

The good news for Techcrunch readers: Every major study conducted to date has placed angel investors’ IRR between 18 and 38 percent, as summarized by my Partner John Frankel and Professor Robert Wiltbank in prior Techcrunch articles. Every major angel study conducted to date has shown high IRR.

IRR 114

IRR Angel Investor Angel Groups Cofounder 114

VC Adventure

AUGUST 12, 2014

The resulting fund would have an IRR in the range of 10% (the exact IRR would depend on the timing of the cash flows, but I constructed a few models to approximate this and 10% was the average return). That’s hardly something to write home about and underscores the challenge of being “average” in this industry.

IRR 122

IRR Portfolio Distribution Finance 122

David Teten

NOVEMBER 17, 2011

While working on my most recent startup, Navon Partners , we were fortunate to have Raul Trevino , a star former Citi investment banker and Columbia MBA, interning with us. When I interned at Navon Partners last summer, I was both surprised and humbled when I realized that I did not know the first thing about valuing start-ups.

Employee 155

Employee IRR Startup Mexico 155

This is going to be BIG.

JULY 30, 2015

Do seed investors have Limited Partners with different return expectations than Series A and beyond investors? I've never heard any limited partner ask me if I can generate a better return than their Series A funds. If you're following on in the A round, then you shed a full 500 basis points on your IRR. No surprises there.

Venture Capital 60

Venture Capital Pre-Money Valuation IRR Valuation 60

The Equity Kicker

MAY 27, 2015

Forwards Partners, and an increasing number of higher value add VC firms (see here for a partial list) have different models which require a new way of looking at things. The definitive answer to these questions will come over time as our portfolio matures, our companies exit, and we can demonstrate a high cash to cash IRR.

Cost 60

Cost IRR Private Equity Salary 60

Both Sides of the Table

MAY 25, 2013

The better way to think about VC returns is, do the firms consistently beat alternative asset clases on an IRR basis to adjust for the increased risk and lack of liquidity? The unfortunate reality is the most partners at VCs firms see hundres of deals every year and invest in 1-2 of them. Here the data is not always kind to VCs.

LP 374

LP Later Stage IRR Term Sheet 374

K9 Ventures

DECEMBER 14, 2008

When it comes to helping portfolio companies grow, it is the people relationships that matter most — can you open doors to prospective customers, employees, partners, lawyers, accountants, bankers and of course other investors. Limited partners invest in venture since it is supposed to be a high-return investment.

IRR 99

IRR Bandwidth Venture Capital Early Stage 99

David Teten

JULY 10, 2017

Angel investing is an exceptionally high-return asset class; I have collected twelve studies on angel returns in the US and UK, which show median internal rate of return (IRR) between 18 and 38 percent. My proposed model looks a bit like the way many VC funds operate internally, except with far more Partners than normal.

Employee 60

Employee Balance Sheet Syndicate Syndication 60

Steve Blank

AUGUST 5, 2014

I was on the way to my lifetime IRR of 90%. My two best partners went off to start Benchmark Capital, very successful to this day, so my firm was going to blow up. Two companies I helped start in 1992, DCTM and Grand Junction Networks both became Stanford business school cases and very valuable, successful companies. But then, trouble.

Venture Capital 333

Venture Capital Silicon Valley Chicago Cofounder 333

David Teten

AUGUST 21, 2019

The RBI investor is motivated to help the company grow because that speeds up the pace of revenue payback, and therefore IRR. Keith Harrington, Co-Founder & Managing Director at Novel Growth Partners, writes, “RBI may not work for a company with a super high growth trajectory, because the payments could be very large”. .

Revenue 60

Revenue Liquidation Preference Equity Cofounder 60

David Teten

MARCH 2, 2013

See the Techcrunch posts by my Partner John Frankel and Professor Robert Wiltbank , my recent post on the quality of angel returns data , as well as reports from the Silicon Valley Bank and Kauffman Foundation. Partners at smaller funds, by contrast, have to hustle before they can cover their mortgage.

LP 114

LP Securities and Exchange Commission Silicon Valley Venture Capital 114

Professor VC

MARCH 10, 2009

His latest venture, Bharosa, was sold to Oracle for a 6X multiple in 3 years to his angel investors, a sweet close to triple digit IRR. Jon Fisher purposely avoided raising venture capital in his ventures. His goal in building the company was to spend 3 years building value and find a good home for the engineers and product.

Bootstrapping 28

Bootstrapping San Jose Silicon Valley Software Review 28

Andrew Payne

MARCH 25, 2009

For too long, venture’s been over-funded and over-staffed with homogeneity: the same kinds of partners, operating with the same fund model, looking at the same investments, in the same markets. The venture capital business is in the middle of a shakeout.

Venture Capital 40

Venture Capital IRR Capital Call Distribution 40

K9 Ventures

MAY 14, 2011

They are still individual investors, they invest on a full-time basis as professionals, but they have funds with Limited Partners. The limited partners may themselves run the gamut from individuals, family offices, venture capital funds to institutional LPs. They have 4-10 partners who are investing on their behalf. Super Angel.

Preferred Stock 125

Preferred Stock Seed Stage Incubator Early Stage 125

Startup Professionals Musings

MARCH 12, 2023

VCs will be looking for a 10X return on their investment in 3 to 5 years, or 30% annual IRR (Internal Rate of Return). They tend to have partners focused on a given business area, with current insights, executive connections, and the ability to bring in new team members. How large is the financial return you project?

Angel Investor 246

Angel Investor IRR Venture Capital Valuation 246

Startup Professionals Musings

JUNE 13, 2020

VCs will be looking for a 10X return on their investment in 3 to 5 years, or 30% annual IRR (Internal Rate of Return). They tend to have partners focused on a given business area, with current insights, executive connections, and the ability to bring in new team members. How large is the financial return you project?

Angel Investor 314

Angel Investor Entrepreneur IRR Valuation 314

Ben's Blog

AUGUST 17, 2020

If an investor could have identified Salesforce’s ability to maintain such prolonged growth upfront, invested in its 2004 IPO, and then held on through to today, they could have made ~70x returns: equivalent to ~30% IRRs over a 16 year period. Not too shabby! Ultimately, determining a valuation is a delicate balance between many factors.

Valuation 36

Valuation Balance Sheet Cofounder Forecast 36

Professor VC

JANUARY 17, 2008

A partner from the law firm (sponsor, covers the drinks and food) tosses out some softball questions to the panelists, the audience chimes in with Q&A and finally, culminates with the meet and greet where the panelists are flooded with business cards and pitches on the next great thing, which is often very similar to the last great thing.

Pre-Money Valuation 28

Pre-Money Valuation Angel Investor Angel Groups Valuation 28

Steve Blank

JUNE 11, 2013

Who are the partners? How do the fund and the partners make money? What is an IRR? Does our product or service solve a customer problem (product-market fit)? How do we attract, keep and grow customers? What are revenue strategy and pricing tactics? What are the resources and activities needed to make this business happen?

Venture Capital 333

Venture Capital IRR Liquidity Event Business Model 333

This is going to be BIG.

MAY 16, 2016

First, the author says the dataset is " a dataset compiled by Bloomberg, covering 3,300 individual funds and 1,600 general partners ". Sounds like a huge amount, but only later does he say that only " 476 funds which had known Net IRR values, the overwhelming majority of which were from vintage 2002, or more recently."

Venture Capital 66

Venture Capital IRR LP .Net 66

Steve Blank

JUNE 11, 2013

Who are the partners? How do the fund and the partners make money? What is an IRR? Does our product or service solve a customer problem (product-market fit)? How do we attract, keep and grow customers? What are revenue strategy and pricing tactics? What are the resources and activities needed to make this business happen?

Venture Capital 225

Venture Capital IRR Liquidity Event Business Model 225

Startup Professionals Musings

AUGUST 2, 2014

VCs will be looking for a 10X return on their investment in 3 to 5 years, or 30% annual IRR (Internal Rate of Return). They tend to have partners focused on a given business area, with current insights, executive connections, and the ability to bring in new team members. How large is the financial return you project?

Angel Investor 266

Angel Investor Entrepreneur Venture Capital IRR 266

Startup Professionals Musings

JUNE 5, 2016

VCs will be looking for a 10X return on their investment in 3 to 5 years, or 30% annual IRR (Internal Rate of Return). They tend to have partners focused on a given business area, with current insights, executive connections, and the ability to bring in new team members. How large is the financial return you project?

Angel Investor 120

Angel Investor IRR Valuation Startup 120

David Teten

OCTOBER 15, 2013

ff Venture Capital has consistently generated a gross IRR on invested capital in excess of 30%, in a world where the average ten-year returns for venture capital firms are in the single digits. But, ridiculously, historically we couldn’t say that it in a public setting. Now we can.

Venture Capital 114

Venture Capital Accredited Investor IRR Later Stage 114

Startup Professionals Musings

MAY 9, 2011

Luckily for me (and regardless of what anyone else says, there is a lot of luck involved in angel investing), I have since had significant positive exits to companies like Kodak, CBS and Facebook, and the current value of my portfolio is approaching the 30% IRR that rational angels target. David: Being an entrepreneur is tough.

New York 221

New York Accredited Investor Advisory Board IRR 221

Agile VC

NOVEMBER 13, 2012

Some of the firm’s partners may move on to new jobs during this phase but at least some are usually still around. typically, which in most cases would to >20% IRR. The lights are usually still on, both literally and metaphorically, and there are often follow-on investments in existing portfolio companies still being made.

LP 154

LP Portfolio Venture Capital IRR 154

K9 Ventures

NOVEMBER 30, 2008

The General Partners (GPs) are the operating guys. The money that the GPs and other employees of the firm invest comes from Limited Partners (LPs) — typically the big university endowments, retirement funds, charitable organizations, family offices and high net-worth individuals. This is what makes it more difficult to scale.

IRR 48

IRR Venture Capital LP Early Stage 48

Feld Thoughts

AUGUST 1, 2018

The $750 million fund combines all of our prior fund strategies – our early stage, early growth, and partner fund investments – into a single fund. When we started Foundry Group, we had four equal partners. We now have seven equal partners. The seven partners all work directly with the companies and partner funds.

Syndicate 17

Syndicate Syndication IRR Canada 17

abovethecrowd.com

APRIL 20, 2016

All Unicorn participants — founders, company employees, venture investors and their limited partners (LPs) — are seeing their fortunes put at risk from the very nature of the Unicorn phenomenon itself. Do you feel the need to raise more capital quickly before the prices erode further and bring down your IRR? LIMITED PARTNERS (LPS).

IPO 40

IPO Term Sheet Silicon Valley Valuation 40