Re:Ask HN: How much money does an average VC make?
by briholt on Saturday May 09, 2015 @03:06PM
(#9517339)
Great explanation. Notice how the VC fees eat heavily into the LPs profits. $500M in profit netted only $200M after fees - leaving only a 20% return after ten years. The S&P500 would've easily beaten that rate. A VC firm needs to have a skyhigh IRR before their LPs get their money's worth.
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Re:Ask HN: How much money does an average VC make?
by surfearth on Saturday May 09, 2015 @08:24PM
(#9518205)
This phenomenon is called the j-curve. Its not that the IRR needs to be sky-high, rather that the fair value of the fund's aggregate investments need to appreciate above the cumulative amount of fees drawn before the IRR can be positive.