EarlyStageVC: Traditional Venture Capital Sure Seems Broken - It's About Time

To make a modest venture return on a $500M fund, you need to generate $1B. Assuming you own an average of 20% of companies at the exit, you need to create $5B of shareholder value. If the average IPO valuation is $216M (per VentureOne, according to a WSJ article last week), that means you need 23 IPOs in a portfolio of 30 companies. The math worked when venture funds were $200M and exits were $500M. It doesn’t work when the numbers are reversed.