Interesting. Why did you stop in 2015? According to PitchBook, the last 10 years have been the worst in venture capital performance history. It would be interesting to see how those numbers have shifted since then.
IRR can only be reliably assessed when realised. Using 2015 is using the assumption that it’s at the end of the 10 year fund life cycle, so investments are realised or close to realisable.
This is just misleading. You either calculate a weighted average IRR across funds with different vintages, or you don’t call 2015 the end of the period just because it’s the last vintage.
@Sergei I get where your concern is rooted, but then what do you use to calculate returns for more recent funds? Only realized exits, or do you take a blend of realized (when they have occurred) plus paper valuations (and do you adjust those up or down)? You introduce a who lot more variability and assumption if you don't use actual results.
Alvar: Good questions. Do you know how PitchBook does this? They publish time series of VC returns—split into U.S. and global—that they update quarterly.
The asymmetry here is everything: small funds have to be selective, while large funds often can’t afford to be. Love how this surfaces that quiet discipline.
Thanks James. Could not agree more. Its super tempting for the larger pension funds, soverign wealth funds who are deploying more capital in venture just to go for "household names" with big funds. Yield farming is just that "farming". Whereas smaller funds are often "hunters" who are highly committed and striving for that top top result.
The challenge at present is those with the big trumpets (big funds) are shouting really loudly and getting the attention of LPs. However, if you want to get real returns then its actually "safer" to push money into smaller funds who are the on the line for those returns.
I think bigger multi-stage funds are "chickens" and smaller funds are "pigs".
The pigs are committed, and the chickens are merely involved.
Interesting. Why did you stop in 2015? According to PitchBook, the last 10 years have been the worst in venture capital performance history. It would be interesting to see how those numbers have shifted since then.
IRR can only be reliably assessed when realised. Using 2015 is using the assumption that it’s at the end of the 10 year fund life cycle, so investments are realised or close to realisable.
This is just misleading. You either calculate a weighted average IRR across funds with different vintages, or you don’t call 2015 the end of the period just because it’s the last vintage.
@Sergei I get where your concern is rooted, but then what do you use to calculate returns for more recent funds? Only realized exits, or do you take a blend of realized (when they have occurred) plus paper valuations (and do you adjust those up or down)? You introduce a who lot more variability and assumption if you don't use actual results.
Alvar: Good questions. Do you know how PitchBook does this? They publish time series of VC returns—split into U.S. and global—that they update quarterly.
The asymmetry here is everything: small funds have to be selective, while large funds often can’t afford to be. Love how this surfaces that quiet discipline.
Thanks James. Could not agree more. Its super tempting for the larger pension funds, soverign wealth funds who are deploying more capital in venture just to go for "household names" with big funds. Yield farming is just that "farming". Whereas smaller funds are often "hunters" who are highly committed and striving for that top top result.
The challenge at present is those with the big trumpets (big funds) are shouting really loudly and getting the attention of LPs. However, if you want to get real returns then its actually "safer" to push money into smaller funds who are the on the line for those returns.
I think bigger multi-stage funds are "chickens" and smaller funds are "pigs".
The pigs are committed, and the chickens are merely involved.