Top Ten Ways to Multiply a Megafund?

Posted by on July 19, 2006 at 11:45 am.

The Thomson/NVCA report on Q2 venture fund raising is out and the numbers are big. In the quarter, fifty venture capital funds raised a total of $11.2 billion. Admittedly, the numbers are skewed because of a couple particularly large funds closing in the quarter. Oak Investment Partners XII landed $2.56 billion, the largest venture fund ever raised; and NEA raised another $2B+ fund.

Those are very big funds to try multiplying and deliver venture capital-type IRRs. If a 40% IRR requires 10X returns over 7 years, that would require $20B+ in returns over that period. My guess is $20B is virtually impossible to reach so either time horizons are shortened or IRR expectations are lowered. That suggests later stage venture investing, and more likely a blurring of what is venture capital, mezzanine, buyout and hedgefund investing. Although it may be doable, it surely doesn’t sound as much fun as early stage company building.

I searched the blogosphere for ideas on how to multiply billion dollar megafunds and came up empty. Any good ideas for the “Top Ten Ways to Multiply a Megafund”?

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