How Long Before VC LPs Get Actual Money Back

LPs in venture funds should not expect money back for years. But how many years?

Took a look at how DPI (real distributions back to LPs) is faring across 2,079 US venture funds that use Carta Fund Admin. Most are emerging managers (Funds I-IV, less than $100M in AUM).

After 6 years, 54% of the 2018 vintage funds have return at least $1 to their LPs.

Of course getting money back from a VC fund after a year or two is a strange circumstance. These funds are investing into startups that take a decade or more to gestate - so early returns quite rare.

It's in the middle years that things get interesting (year 4, 5, 6, and beyond).

𝗦𝗼𝗺𝗲 𝗰𝗼𝗻𝘀𝗶𝗱𝗲𝗿𝗮𝘁𝗶𝗼𝗻𝘀 𝗳𝗮𝗰𝗶𝗻𝗴 𝗚𝗣𝘀:

• If a portfolio company has an exit, should the capital from that exit be recycled into new bets or returned to LPs?

• Is it useful to take secondaries out of portfolio companies that are doing well in order to get "points on the board"? Or should the GP let that investment ride?

• What do you do with capital that is returned to the fund by companies shutting down (obviously this is typically a small amount of money)?

• In the current climate of low liquidity, is there an increased focus on M&A / secondaries for the second-tier of portfolio companies within a given fund? How do you balance founder support and LP demands?

This whole ecosystem, from LPs to GPs to founders, is not for the faint of heart.

Here's to a year of increased liquidity 🙏

#VCfunds #DPI #LPs #venturecapital #fundmanagers

Full report with much more DPI data here: https://lnkd.in/dswa4XC4