VCs invest through funds that 'shut down' after a few years so, unlike mutuals fund that exists indefinitely, they have a limited timeframe to make that investm

VCs invest through funds that 'shut down' after a few years so, unlike mutuals fund that exists indefinitely, they have a limited timeframe to make that investment pay off. VCs have the expectation that most investments will fail, so the only way to return a profit to their investors (LPs) is to have a few really big hits. For example imagine a VC with a fund that only holds two companies, and has invested $1mm in each. The first has dividend paying 8% (for a total of $80,000) year over year. That wouldn't be bad on its own, but say the other investment lost 75% of its value (or $750k). The overall return for that combined portfolio over a 10 year period would be pretty poor. The real value would be if one of those investments of $1mm in equity turned into $20mm in equity over the 10 years through an acquisition or IPO. If that were the case, a dividend of 8% would be very small in comparison.