      SaaStr · 2015-05-03
      · 4050d
    

The Economics of Venture Capital: Why VCs Must Hunt for Unicorns to Survive

Jason Lemkin explains the mathematical imperative forcing VCs to pursue unicorn exits. A $200M fund needs $5.3B in collective exits to deliver 4x returns to LPs, requiring multiple billion-dollar companies. This structural reality of venture capital economics shapes VC behavior and investment strategies.

7 metrics· Cited 0× in the knowledge base ·Open source ↗

Metrics in this report

Average VC Ownership at Exit

15%

average

Standard portfolio company

Fund Size (Series A Example)

200$ millions

example

Moderate-sized VC fund

Investments Per Fund

30count

typical

$200M fund

LP Gross Return Expectation

4xmultiple

typical target

Venture capital funds

Required Collective Exit Value

5,333$ millions

calculated

$200M fund at 4x return target

Return Requirement (Smaller Fund)

4xmultiple

minimum

$50M fund baseline

SaaS Hyper-Growth Window

5-6quarters

maximum

$1M to $10M ARR growth