Fund Return Benchmarks

A discussion about venture fund returns and investment metrics, focusing on expected returns and timeframes for angel investing.

Basic Fund Return Metrics

• Standard successful fund returns 3x over 7-10 years
• Great funds achieve 5x or more
• Single big winners (Uber, Coinbase) can dramatically skew returns upward
• Returns typically come as lump sum after 7+ years, not annual payments

Example Return Calculation

• Investment: $12M deployed over 3 years
• Conservative return estimate (3x): $36M total return
• Fund structure:
  • Return initial $12M to investors
  • 20% carry on remaining profits
  • Results in ~$7M return for fund manager
• Timeframe: 8-10 years until payout

Investment Strategy Insights

• Angel investing viewed as "dipping net in stream" vs full-time fishing
• Not meant to be primary income source
• Can make more money building businesses in same timeframe
• Value comes from:
  • Network building
  • Learning opportunities
  • Business knowledge
  • Skin in the game
  • Alternative to MBA education ($120-200k equivalent investment)

Scaling Potential

• Can reach steady state of consistent returns
• Opportunity to scale to larger amounts:
  • $20M/year
  • $50M/year
  • $100M/year
• Potential to build full investment firm with professionals