Startup Funding Espresso – Lifecycle of the VC Fund

Lifecycle of the VC Fund

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Venture Capital funds typically run on ten-year cycles.

At a high level, the VC fund takes in capital from the Limited Partners and deploys the first half of the funds in years 1 to 3.

The follow-on rounds are deployed in years 4 to 5.

The fund collects returns in years 6 to 10.

There may be early failures, in which case the allocated funds for the follow-on round are still available.

The funds not yet deployed or allocated are called ‘dry powder’.

This is the amount of funds available to deploy for new companies.

Investments made during the latter half of the fund are made in later-stage companies, which can achieve an exit faster.

Some portfolio companies fail to exit during the ten-year window.

The team must decide whether to delay the exit to gain a larger return or sell the company to remove it from the books.

During the latter half of the life cycle, the VC team helps the companies grow and then achieve an exit.

This is where the VC’s network comes in.

A good fit for a VC is a company in which they can help find additional team members as well as follow-on funding.

Consider the life cycle of the VC fund and how it impacts the time spent by the VC team.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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