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Investor Connect Podcast

Investor Connect is for investors interested in learning more about investing in startup and growth stage companies. Experienced investors share their experiences and advice with those who are considering an investment into startups and growth companies. It includes a podcast series of interviews with investors to inform others about the process of funding startups as well as a resource list and a discussion board.  

Topics include sourcing, analyzing, and researching companies. Other topics include valuations, terms Sheets, board of directors, board of advisors, due diligence, syndicates, venture capital, angels, angel networks, family offices, crowdfunding, exits, and more.

Investor Connect is a community program. We welcome your suggestions for speakers and topics which you can send to us through the Contact page. No registration is required to use the resources.  Discussion boards are available to post and answer questions about startups and growth company investing through which registration is required.

Investor Connect is a program under the Texas Open Angel Network which is a 501(c3) non-profit dedicated to the education around startup funding.

Disclaimer: Hall T. Martin is the Director of Investor Connect which is dedicated to the education of investors for early stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.

Aug 31, 2022

Investment Returns on a VC Fund

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

In a VC fund, limited partners look for greater returns.

The risks are higher, and the hold times are much longer, so LPs look for better returns than the stock market.

In general, they look for a 10-20% IRR better than the market index.

Historically, top VC funds have a Distributed Paid-In ratio of 3X while the Total Value to Paid-In ratio is 1.5X, not counting the dot-com era.

The manager of the VC fund can improve the performance of the fund in several ways:

Remember, IRR is higher the sooner the funds are returned to the LP.

A VC fund manager can increase the IRR by taking funds in a series of capital calls rather than all upfront.

Most funds ask for ⅓ of the invested capital up front and then two more capital calls in the following years.

In pledge funds, the LPs provide the funding for each deal as it arises.

Another option is to shift some of the management fees into the carry.  This will increase the return to the LPs.

Seventy-five percent of VC funds do not return anything to the limited partner after the fees are accounted for, and most limited partners know this.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.


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