SaaStr · 2015-11-09
· 3859d
VC Fund Deployment Strategy: Can VCs Actually Return Capital Due to Limited Investment Opportunities?
Jason Lemkin analyzes whether venture capital firms return undeployed capital to investors due to insufficient great investment opportunities. He argues that deploying a typical VC fund is relatively straightforward, requiring only 1.0-1.5 quality investments per partner per year, and that there are plenty of viable startups to fund even if unicorn-level opportunities are scarce.
Metrics in this report
Average First Check Size
4$M
approximate
typical initial investment in startups
Fund Reserve Ratio
60-66%
range
percentage of fund kept for follow-on investments
Initial Deployment Ratio
34-40%
range
percentage of fund deployed for first checks
Number of Initial Investments
20count
calculated
$200M fund with $80M initial deployment at $4M checks
Required Investments per Partner per Year
1.0-1.5count
range
to fully deploy fund in 3-year timeframe
Top Quartile VC Fund IRR (2000-2001 vintage)
0%
>=
minimum threshold for top quartile performance in that era
VC Fund Size
200$M
example
typical large venture fund