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Why Venture Capital (VC) Firms Don't Share Their Results As Open As Fund Managers Do

Why Venture Capital (VC) Firms Don't Share Their Results As Open As Fund Managers Do

Back then when we were raising funds for Infinite Ventures, a couple of my banking friends asked me why we didn't share our results; especially in terms of Internal Rate of Return (IRR) so that we could easily (well.. just hypothetically) close our fund rounds. Well, at least from our perspective, there are a couple of reasons why we believe most VC's (even the good ones) don't share their results openly as most fund managers / hedge funds do. 

Firstly, the best, of the very, very, best funds (still couldn't emphasize enough on it) have shockingly great return. Well, only a few do, but they are extremely good, that it is as though as they were driving a gold-plated Bugatti Veyron - you would need to hide it. Plus, most entrepreneurs would be either too threatened or compelled that they will start questioning themselves. It's a solid reminder why you're not really on the same page.

Image courtesy of thewondrous.com

Image courtesy of thewondrous.com

 

Secondly, even the best (including subsidized) funds has negative returns (especially when you incorporate their expense of working and so forth) toward the early phase of its funds' life. Most Limited Partner (LP) understand this, but non-LP's don't.

Thirdly, similar to the entrepreneurs, start-ups, early stage businesses, you just have to Fake It Till You Make It - particularly all the VCs whom just formed & its extremely early stage funds.. You could be in a state of a shock yourself especially based on the point number 2 - these early VCs will be in a desperation mode trying to fish for startups backed by great-proven-track-records entrepreneurs (similar to entrepreneurs looking great VCs).

and Finally, they're hoping for a miracle for their gloomy portfolio. Well, combining both points number 2 & 3, you'll easily see 3-5 years of negative IRR of their funds (and not including the few super terrible bets they've made on startups that they have to hide it from their own page, lol), but with just ONE good investment return can still deliver a positive fund. 

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