Startup Funding Espresso -- Investment Returns on a VC Fund
Investment Returns on a VC Fund Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing. In a VC fund, limited partners look for greater returns. The risks are higher, and the hold times are much longer, so LPs look for better returns than the stock market. In general, they look for a 10-20% IRR better than the market index. Historically, top VC funds have a Distributed Paid-In ratio of 3X while the Total Value to Paid-In ratio is 1.5X, not counting the dot-com era. The manager of the VC fund can improve the performance of the fund in several ways: Remember, IRR is higher the sooner the funds are returned to the LP. A VC fund manager can increase the IRR by taking funds in a series of capital calls rather than all upfront. Most funds ask for \u2153 of the invested capital up front and then two more capital calls in the following years. In pledge funds, the LPs provide the funding for each deal as it arises. Another option is to shift some of the management fees into the carry.\xa0 This will increase the return to the LPs. Seventy-five percent of VC funds do not return anything to the limited partner after the fees are accounted for, and most limited partners know this. Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.Let\u2019s go startup something today. _______________________________________________________ For more episodes from Investor Connect, please visit the site at: \xa0 Check out our other podcasts here: \xa0 For Investors check out: \xa0 For Startups check out: \xa0 For eGuides check out: \xa0 For upcoming Events, check out \xa0\xa0 For Feedback please contact info@tencapital.group\xa0\xa0\xa0 Please , share, and leave a review. Music courtesy of .