Does fund size matter when it comes to returns in venture capital? Below are returns broken down by fund size for VC from 1978 to 2019. The distribution of returns is highly similar for funds in bracket 3 and 4. Even the $250M to $500M bracket is similar, except for the percent above 20x. This is likely because it is easier to deploy smaller amounts of capital into the earliest stages of VC, where there is more upside, while the largest bracket has the lowest loss ratio but also a cap on your upside. In the full dataset, only 0.1% of funds have a TVPI greater than 40x and they are found in bracket number 4. #powerlaw #venturecapital #earlystageventure #investmentmanagement
Yoav Fisher
1y
Link to data? Or link to paper?
Thanks for sharing, Jamie. Is there publicly available data on the funds that returned >40x?
Duncan Logan
1y
Jamie Rhode, CFA do you have any data on %capital deployed at follow-on versus initial check. Binary outcomes point to riding winners harder.
Lance Meikle
1y
Thanks for an informative post. Comparing returns in the absence of fees is a moot point.
Muieen Cader
1y
Do you have idea of sample size? I have seen a lot of “insights” drawn from small sample sizes.
Thank you for sharing this! Can you share the link to the original study / data set?
I would also be curious as to any data involving the relationship between size and return OF capital.... Thanks for the great reminder about knowing one's capacity limits.
COO at Bedford Consulting
1ygreat analysis and thx for sharing. It would be really interesting to see the net IRRs also - my sense is larger fund size => later stage bets => earlier LP returns, on average..? though the real story here I think is, regardless of fund size, for >80% of their vc investments, LPs are going to net out with lower returns than the public market benchmark - you'd need a multiple>x3 in a 10yr fund life for a 12% IRR, which you'd want given the illiquidity penalty (at least)?