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: