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Can someone help me do some math here? Take these sentences: "It was all about five investments in which we made 115x, 82x, 68x, 30x, and 21x." "In our 2004
by habosa 11y ago
Can someone help me do some math here? Take these sentences:
"It was all about five investments in which we made 115x, 82x, 68x, 30x, and 21x."
"In our 2004 fund, we invested a total of $50mm out of $120mm of total investment in our nine losers. "
OK so in the 2004 fund we have $70mm being invested in companies with rates of return between 21x and 115x. Let's be conservative and say the total return on that $70mm was 50x. That means 70mm --> 3.5B. If we assume that's the total return on the fund we get 120mm --> 3.5B.
I am now going to assume these returns were realized over a period of 10 years. So that works out to about 40% gains each year (compounded 10 times).
Is USV really making 40% every year for a decade? Are other VCs doing that well? I knew these funds were good investments but I didn't realize just how good.
- corin_ 11y agoThe $70m is over 12 companies of which we know details of 5 of them.
- hullo 11y agoThey are not all that good. As he says himself, not even their other funds are as good as the 2004.
- manuelflara 11y agoWell, investing in startups is a great investment... when you win, like this fund which apparently gave out great returns. But of course, those investors could have also lost all their money. Risk and potential return always go hand in hand when it comes to investing money.
- scott00 11y agoNo idea how reliable this is, but here's what Forbes has to say about USV's performance: "66.96% IRR for its 2004 fund, a 38.88% IRR for its 2008 fund, a 29.04% IRR for its 2012 fund and a 61.44% IRR for its first opportunities fund" source: http://fortune.com/2014/01/24/union-square-ventures-raises-new-funds/ http://fortune.com/2014/01/24/union-square-ventures-raises-n...
- jimminy 11y agoHe also says they invested in 21 companies in the 2004 batch. Which means that 7 other companies returned negligible results. Average investment per company was about $5mm. So we can end up with: $5mm * 115 = $575mm $5mm * 82 = $410mm $5mm * 68 = $340mm $5mm * 30 = $150mm $5mm * 21 = $105mm Total: $1.58B, about $1.5B after losses. So that comes out toabout a 27% return, using the same math as you, before costs and management fees.
- stupandaus 11y agoThe final results are public information via UTIMCO, so no backdoor calculations are necessary: https://www.scribd.com/doc/277150709/UTIMCO-PrivateMarkets https://www.scribd.com/doc/277150709/UTIMCO-PrivateMarkets UTIMCO invested $22.25m and was returned $280m in cash with $33m still active in investments, resulting in a cash-on-cash return of 12.57x and a 66.7% IRR (after fees). Overall fund size was $125m, so $1.57b cash-on-cash returns for the fund after fees, assuming no LP tiered returns
- morgante 11y agoYour 50x assumption is probably overly generous, but in general yes: the best VC funds do have great returns. But we're talking about less than a dozen firms with returns that good and they're all heavily oversubscribed. The average VC has a much less attractive return profile. USV is not your average VC.
- deleted 11y ago[deleted]
- mathattack 11y agoThe best VC firms do make that in their best years. VC is a strange field in that the winners have outsize performance, while the rest fight to break even. Unlike Mutual Funds and most hedge funds, the performance of top VCs persist over time too. Remember that this is a field that disproportionately rewards the winners. (Look at Google's early investors making 1000x [0]) The 40% isn't what investors see. Take away 2% per year for expenses and 20% of the upside and you're down to 30% for investors. [0]https://www.quora.com/How-many-shares-did-Andreas-von-Bechtolsheim-receive-for-his-first-100k-Google-investment https://www.quora.com/How-many-shares-did-Andreas-von-Bechto...
- olalonde 11y agoOn a related note, does anyone know why none of the big VC firms are publicly traded? Has that model been tried before?