Venture capital financings and the number of new funds that have been raised is staggering. I see tons of emails requests on my desk to see venture funds LP pitches. Sometimes I get sneak attacked by someone I thought was trying to collaborate on deal flow, and then I get ambushed into hearing an LP pitch. If you are doing this, know it is not a good look.
Why are funds desperately raised right now? It’s simple- they’ve got substantial unrealized gains that show their fund valued 3-5x. These, of course, are primarily markups and not cash disbursement.
How do you vet a venture fund performance? This is my secret.
Calculate all unrealized gains
Calculate all realized gains
Calculate the blended gain
Diligence hard the deals that are 1.0x (because they might be much less than 1.0x)
Weight all of these differently with an emphasis on over-realized vs. unrealized.
This strategy provides a roadblock for some emerging managers who have not had enough time on the ice to have received the fruits from their labor. If that is the case, I will try to uncover track records from previous investments at other firms, angel investments, etc.
