I've been trying to understand the very basics of venture capital, as a relative finance-illiterate. Some stuff I've learned from looking at return on investment numbers:
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VCs as a class have about the same internal rate of return as Berkshire Hathaway https://www.berkshirehathaway.com/2018ar/2018ar.pdf …, a standard example of a very good investment firm.
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An exceptional single *company* can have a higher rate of return, though: Amazon has been growing at an average rate of 36% a year since it IPO'd. If you had to pick between being Jeff Bezos and being a typical VC, on purely money grounds, you'd want to be Bezos.
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It's apparently possible to be a VC firm that raises large funds and underperforms; DCM Ventures is in the top 10 firms for largest funds raised and the IRRs I could find are as follows: DCM II: 0.20% DCM III: 2.1% DCM IV: 4.89% DCM V: 18.69% DCM VI: 3%
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End of conversation
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General note: I recall many claims like this being made for hedge funds in the 80s/90s. But estimates are now far lower: the original claims were highly selective, ignored fees/costs, risk, selection effects, and publication bias (some finance databases remove *retroactively*!).
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