Most venture funds will underperform the public market. Often by a lot.
Or to put it another way, venture managers - top quartile and 3x net are NOT synonyms.
In fact, they often mean different things entirely.
Usually when discussing performance expectations with LPs, VCs will toss around the goal of being a "top quartile" fund. But if that sort of performance is still well short of the necessary 3x net bar...does it matter?
Or should the real goal be top 10% fund? or top 5%?
Data below is only net TVPI, so not even the full net DPI stat that truly matters. But even in this less certain stat, the top quartile has only eclipsed 3x net for a few quarters in vintage year 2017.
And we haven't gotten to the big question yet:
Is 3x net even the right target anymore?
If a venture fund is going to take 15 years to return capital, not 10...should the right benchmark be 4x net?
3x, 4x, etc etc - main point is this:
Most venture funds will underperform the public market. Often by a lot.
(of course if you invested in the S&P 493 and left out those 7 tech winners...you would also underperform the market by a lot)
Power law in everything 🙏
More data from Carta on funds here: https://lnkd.in/gSKj-gdC
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