Dear SaaStr: How are Funds Invested by Venture Capital Firms?

It varies of course, but roughly for bigger funds:

  • Funds tend to invest in 20–40 startups over 2–4 years. Big and tiny funds may do more, but in general, this is the sweet spot.
  • Funds use about 40% of their fund for initial, first checks
  • They earmark another 40% for follow-on checks into later rounds in those investments over the next 2–10 years
  • And 20% of the fund is used for fees and expenses, at least initially

So a $200m VC fund might actually only use $80m for initial checks into say 25 startups.

Another way to see the math is that most funds put 1%-2% of “the fund” into each investment — initially. Sometimes a bit more, but not too much more.

A related post here:

VCs Run Out of Money (Sort of). Here’s How & What That Means.

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