What to Expect When You’re Expecting Venture Capital Returns

• http://www.thisisgoingtobebig.com/blog/2015/7/30/venture-capital-return-model

One of the first things I did when I joined the venture asset class as a lowly institutional LP analyst in 2001 was to build the VC fund cashflow model. Just about every analyst who looks at fund investing has built one. You incorporate expected company returns, mortality rates, and fee structures to try to predict how a venture capital fund works from a cash in, cash out, and NAV standpoint.

It’s basically the unifying theory behind all your assumptions about 10% of the investments driving most of the returns, needing certain multiples of return, and the basics of how many deals you do a year, with fees layered on.

Let’s be clear about this exercise. It’s not perfect.

• http://www.thisisgoingtobebig.com/blog/2015/7/30/venture-capital-return-model