5 ms·

If you don't make enough money when every single one of your portfolio companies exits for $50M, then you're doing it wrong.

lisper 10y ago
That is a horribly naive analysis. Did you even read the article? $50M can be a great outcome or a terrible one depending on the circumstances. What valuation did you buy in at? If you bought in at $100M, a $50M exit means a 50% loss. How much time did it take to exit? A 50% return after 1 year is a very different outcome from a 50% return after 10 years.
- asah 10y ago
  actually, read the post - the point isn't about ROI, but absolute dollars. A VC (human) can't do 25 deals because they can't sit on that many boards.
  - throwaway_exer 10y ago
    If you read the post, the whole point is about ROI. Also, I'm sure a full-time VC could sit on 25 boards - that's why some VC's have a chauffeur to drive them from meeting to meeting.
  - jwatte 10y ago
    First: yes you /can/ Second: you don't /have/ to have a /personal/ board seat Third: funds typically have multiple partners If there is one lead and five follows in a series A, do you really think there are six new board seats created?
- staticautomatic 10y ago
  I take issue with the model, not the math.
liuhenry 10y ago
If you invest $10M in a company and get back $12.5M after ten years, that's a 2.3% annual compound return. You would have made nearly twice as much (with virtually no risk) if you had bought a government bond with the money instead.
- mark212 10y ago
  I agree with your point, but you are vastly overstating the return on government bonds. Current yield on the 30 year is 2.31% and everything with a shorter maturity is way less than that.
  - liuhenry 10y ago
    Sorry, I should have been more specific. A VC fund started in 2006 would have gotten around 4.5% return on a 10 year bond. You're right about current yields, but they're also at all-time historical lows right now.
- toodlebunions 10y ago
  10 year tbill yield is 1.5%

lisper 10y ago

That is a horribly naive analysis. Did you even read the article? $50M can be a great outcome or a terrible one depending on the circumstances. What valuation did you buy in at? If you bought in at $100M, a $50M exit means a 50% loss. How much time did it take to exit? A 50% return after 1 year is a very different outcome from a 50% return after 10 years.

asah 10y ago
actually, read the post - the point isn't about ROI, but absolute dollars. A VC (human) can't do 25 deals because they can't sit on that many boards.
- throwaway_exer 10y ago
  If you read the post, the whole point is about ROI. Also, I'm sure a full-time VC could sit on 25 boards - that's why some VC's have a chauffeur to drive them from meeting to meeting.
- jwatte 10y ago
  First: yes you /can/ Second: you don't /have/ to have a /personal/ board seat Third: funds typically have multiple partners If there is one lead and five follows in a series A, do you really think there are six new board seats created?
staticautomatic 10y ago
I take issue with the model, not the math.

liuhenry 10y ago

If you invest $10M in a company and get back $12.5M after ten years, that's a 2.3% annual compound return. You would have made nearly twice as much (with virtually no risk) if you had bought a government bond with the money instead.

mark212 10y ago
I agree with your point, but you are vastly overstating the return on government bonds. Current yield on the 30 year is 2.31% and everything with a shorter maturity is way less than that.
- liuhenry 10y ago
  Sorry, I should have been more specific. A VC fund started in 2006 would have gotten around 4.5% return on a 10 year bond. You're right about current yields, but they're also at all-time historical lows right now.
toodlebunions 10y ago
10 year tbill yield is 1.5%