[boulos]

Yep, but that’s equally true of any IRR calculation (for any IRR, you should compare to the risk-free rate or alternatively some other equal-risk benchmark). As an example, perhaps the real comparison for VC investment should be to having your “capital to be called” in the S&P 500 while waiting for capital calls. Except, as you allude, that’s quite risky for “you are required to deliver” (and IIUC, often within days). That makes the easiest assumption some sort of money-market fund or treasury something something.

In any case, the $X in S&P 500 at t=0 versus the IRR of a venture fund is not an apples-to-apples comparison. There are many ways to meet your capital calls, and I suspect that sophisticated investors aren’t keeping the cash in their checking account waiting for an email.

[609venezia]

I agree it isn't apples to apples. I wonder if it is nevertheless the best comparison, though, because they're two fundamentally different beasts.

If I have a lump of cash I need to deploy, I can buy lump sum SPX at t=0. I can't call a VC and say "here's X money, invest it all immediately."

The fairest comparison probably would be lump sum SPX against a blend of VC IRR and money market, converted from one to the other at a typical capital call rate, but as the number of variables increases so do the number of assumptions, and given the low returns on money market funds I don't see how the extra complexity adds much to the story.

Am I missing something?