A VC fund makes five initial investments, four in A-rounds and one in a B-round, along with
Question:
A VC fund makes five initial investments, four in A-rounds and one in a B-round, along with four follow-on investments:
| A-round | B-round | C-round | |||||||
| Comp | Fund inv | Total inv | Pre-$ | Fund inv | Total inv | Pre-$ | Fund inv | Total inv | Pre-$ |
| ONE | 10 | 10 | 25 | ??? | 18 | 34 | none | none | |
| TWO | 12 | 18 | 40 | none | none | ||||
| THREE | none | 10 | 20 | 8 | 24 | 62 | ??? | 35 | 128 |
| FOUR | 12 | 12 | 34 | ??? | 19 | 56 | ??? | 42 | 190 |
| FIVE | 15 | 15 | 39 | none | none |
The fund makes one initial investment per year (ONE at t=0, TWO at t=1, THREE at t=2, FOUR at t=3, and FIVE at t=4), and does pro-rata follow-on investment in all subsequent rounds. There are two years between each subsequent round (e.g., ONE's B-round is at t=2 and THREE's C-round is at t=4). THREE exits for $22m at t=7 and FOUR exits for $625m at t=9 (everything else is a zero).
a. How long does this partnership run?
b. Calculate how much the VC invests in each of the four rounds where the table shows "???."
c. Roughly how big is this fund?
d. Calculate the GRM. What does this suggest about the fund's performance?
e. Roughly what carry do you expect this fund's GP to receive?
f. Calculate the gross IRR for this fund.
g. Roughly what net IRR do you expect this partnership to provide to its LPs? Why?
Expert Answer:
ANSWER Lets tackle each part of the question step by step a How long does this partnership run The partnership runs from t0 to t9 which is a span of 1... View the full answer
