Venture returns are measured with the same tools as the rest of private markets: TVPI, DPI, RVPI, IRR and PME. What they measure is different. Venture outcomes follow a power law. Most investments lose money, a few return the fund, and fund results depend on whether the manager owned enough of an outlier. This section explains the metrics, the gross-to-net bridge, loss ratios and concentration, power-law portfolio construction, public-market equivalents, the venture J-curve, and the research on whether VC returns persist. The supporting files compute a full ten-year fund and a Monte Carlo of portfolio sizes in Python.
What the study covers
- 1Overview
- 2Mechanics: the metrics
- 3The power law and portfolio construction
- 4Public market equivalents
- 5Key numbers
- 6Landmark cases: the power law in practice
- 7Pitfalls
- 8How an expert thinks about it
Technical exhibits
Worked examples, checklists and case studies included with this study.
Fund Metrics Worked Example
A hypothetical $100m 2016-vintage fund with 25 companies; year-by-year calls, distributions, NAV, carry, PIC/DPI/RVPI/TVPI, interim IRR, J-curve, loss ratio, concentration, KS-PME and Direct Alpha versus the S&P 500
Power Law Portfolio Construction
A deal-outcome distribution calibrated to Correlation Ventures' published statistics; Monte Carlo of 5–200-company portfolios; ownership, reserves and fund-returner math
Persistence Benchmarks and Pitfalls
Persistence research (Kaplan-Schoar; Hochberg et al.; Harris-Jenkinson-Kaplan-Stucke; Korteweg-Sorensen; Nanda-Samila-Sorenson), benchmark providers, Carta and Kauffman data, J-curve phases, VC-specific measurement traps