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by charlesdm 3593 days ago
> You're making it sound like USV is struggling or becoming extinct, but my impression is that they're actually doing incredibly well.

No venture fund is doing "incredibly well" unless they return an IRR of at least 20-30% per annum. For a $175m fund, that means turning the initial $175m in approx. $455m. over 8 years (i.e. 3x, at 20% IRR). Frankly, almost no fund succeeds in doing that.

In the case of USV, doing it once doesn't mean they'll be able to do it again. I'm curious to see if their next fund will be able to do as well as their first. Respect if they can they keep making those kinds of returns by investing in startups though. It is incredibly hard, there are much easier ways to make money.
2 comments
lpolovets 3593 days ago
Here's a public doc that shows returns for a few USV funds: https://www.oregon.gov/treasury/Divisions/Investment/Documen... (search for "union square" in the PDF)

Union Square Ventures 2004 -- 67% IRR

Union Square Ventures 2008 -- 28% IRR

Union Square Ventures 2012 -- 42% IRR

('04 is particularly impressive because it was 14x fund at the time that the linked PDF was written)

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rlucas 3593 days ago
The people who decide what is "incredibly well" are the institutional investment consultants, e.g. Cambridge Associates, who advise the actual investors in venture (and every other asset class) what is going on in reality.

The yardstick is not absolute. It's not even relative to numbers that consumers / the public (you?) generally see.

It's relative to all the other venture funds (typically grouped by vintage year) and relative to the other asset classes to which an investor might allocate -- modified by the historical and projected covariances among them.

To make it concrete: 20% IRR might be "incredibly well" in some vintage years (say, 2000?) but it might be "median" in some other vintage years (say, 1995?).

And (despite everyone saying they only want top quartile managers for everything, just like Lake Woebegon's children) a rational institutional investor might well look at venture in a period where it's been lagging the public markets, and decide it's quite rational and profit-maximizing to keep allocating to it, precisely because it doesn't march in lockstep with the other asset classes.

(And, agreed: there are much easier money games to play and venture is decidedly a "get rich slow" scheme.)

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