What amount of AUM/size of recent fund/recency of fund raises differentiates between successful/large VC firms and small/shitty ones?
Is a VC firm with $1Bn in AUM that invests primarily in series A a huge firm, given the investment sizes will be relatively small?
You're thinking about it all wrong. You're equating fund size with success/quality. What matters are returns. The best performing VC funds in history have been some of the smallest. I certainly wouldn't label small firms as "shitty".
I kind of threw that in as I want some measure of information on compensation too - larger fund = higher compensation.
Also, though I agree the small funds may be some of the best performing, I'd rather a small slice of carry of multi-billion dollar funds that do well than a larger slice of carry of a very small fund that does exceptionally.
Either way, how does one differentiate between good funds? Does it bode well if a VC that's 9 years old raised ~$250mm 2 years ago and is now raising ~$500mm this year?
"I'd rather a small slice of carry of multi-billion dollar funds that do well than a larger slice of carry of a very small fund that does exceptionally." Again, totally wrong. Having a large carry amount of a small fund (which statistically can outperform at multiples of a large fund) can be much more lucrative. I was at a small fund that is at over 10x DPI, and I've made more from that than 95% of my peers at megafirms. I have a lot of peers at megafunds who are underwater. Their funds have 0 DPI, and on top of that they had to contribute to the GP commit so are negative in net worth. It is true that salaries are higher at megafunds, but if you suck, you'll get fired faster than you think. If you looked at the returns across the industry (which I've seen from institutional LPs), you would see what I'm talking about. Smaller funds are much more likely to 1) get into the carry, and 2) far exceed the DPIs of megafirms by multiples.
Isn’t Benchmark one of the best and $500m?
I’m guessing it’s all partner funded.
I do wonder how the fuck Seqouia deploys $85B in VC unless they are multi strat now.
Its not. They take outside capital but 30% carry. Partners probably should fund it themselves though.
And yeah, Benchmark is the GOAT. The all-star team of VC. Their funds are around $500m. This shit doesn't scale. They regularly return 5x+ on their funds.
Sequoia with $85b AUM... that's a mgmt fee game at that point. Same as big PE, etc. I would take benchmark in a fucking heartbeat.
Very few funds get 30% straight carry. I don't know where your'e getting your info. Truly top tier firms that have proven themselves (Sequoia, Benchmark, Lightspeed, etc) get it. Some have laddered carry (20%, but 25-30% after a certain net multiple), but that's exceptional. 2 and 20 is still in the norm.
I didn't say all do did I?
I said Sequoia, which you pointed out. I know the standard is 2 and 20.
"I've heard VC is 2.5 and 30 for fees, Sequoia probably higher". This is categorically not true. For someone with 0 VC experience, you're putting off a lot of false facts.
Facts tbh I did fuck that up mb.
I know nothing about VC.
I also feel my original question still hasn't been asked - how do you vet a VC firm?
Fair enough. Re your Q: first off, I would look through their portfolio and see if they're in some recently high performing names - have these companies raised a solid follow-on round post 2022? A good sanity check is to check the companies' headcount trend on LinkedIn - you should be able to see employees over time, which is highly correlated to how well they're performing. If the companies have reduced employees in the past year, not a good sign relative to them increasing headcount. Also if you can, would try to reference them with mutuals or other folks you know in VC. You can also see if the firm has had turnover recently - check for former employees on LinkedIn. You can also try to reach out to former employees to get a pulse check - some may not be willing/able to chat due to NDAs, but some would be.
As an institutional LP, I can assure you that 2 and 20 is not the norm for seed or early stage VC. Norm is 20% and then 25% above c. 3x, full catch up. And this extends way beyond name brand firms
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