Paul Cohn has all the right answers here.

It did happen with a few ’00-’01 vintage type funds that were massively over funded, see, e.g.: VC Mavericks / Crosspoint Venture Partners puts forth some provocative views on investing

Top quartile for an ’00-’01 fund is something like >=0% IRR.

The thing is, though, in anything but the total wasteland of ’01-’02 … it’s totally easy to deploy a fund with full reserves.

Typically, a fund might keep 60% or even more (66%) of the total fund assets “in reserve” for follow on investments.

So image you have 4 partners in a $200m fund, keeping 60% in reserves for later:

  • That really means “only” $200m x .4 = $80m is allocated for “first” checks into brand new investments.
  • Imagine the average first check size is $4m or so.
  • That’s only 20 investments over say 3 years, or really,
  • So really, that’s only ~1.5 investments per partner per year to deploy the whole fund in 3 years.  Maybe 1.0 if the check sizes are a bit larger.

There aren’t that many Ubers out there.

But there are a lot of Pretty Good start-ups.  A lot of them.

Doing 1.5 Pretty Good investments a year ain’t hard.

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