4 ms·
It is still expensive to build big companies, and $1.5B is tiny by financial markets standards. Bond firms like Pimco and Blackrock measure things by $100Bs and
by mchusma 13y ago
It is still expensive to build big companies, and $1.5B is tiny by financial markets standards. Bond firms like Pimco and Blackrock measure things by $100Bs and trillions.
Let's say you invest in 50 startups per year for 5 years. That is 250 firms, averaging $6M/firm.
- imjk 13y agoYou're forgetting money that they can leverage from banks with the money they raised.
- HockeyPlayer 13y agoI've never heard of a VC leveraging up with borrowed money. Who would be on the hook if the fund loses money?
- ganeumann 13y agoVCs' portfolio companies often raise debt. This is called venture debt and the lenders are banks like Silicon Valley Bank. VCs tend to have a love/hate relationship with venture debt. On the one hand, it means they suffer less dilution as the company grows; on the other hand, it means their investment gets riskier just at the point where they are finally de-risking the company.
- suzerain 13y ago1.5 is small compared to the war chests Apollo, KKR and the like amass, but it's huge for a VC accustomed to writing smaller checks. Average US VC find is 107mm. They're either going to be doing way more deals or shifting some of the fund focus to later stage. I expect the former, given that investors seem to like the granularity of separate venture and growth funds to pick from.