Venture Investors Health Fund on liquidity in venture capital

Itzel Moncada provides excellent, data-backed clarity on what LPs truly value: not just deals, but the human capital, networks, and design of the GP. This is the traditional understanding of alpha. But there's a next-level evolution emerging. The highest future alpha won't just be found in a GP's existing network or experience. It will be generated by a GP's ability to architect new economic systems that create value in fundamentally different ways. We call this Coherence Alpha. Coherence Alpha is the excess return generated not from picking winners, but from orchestrating coherence—designing ventures where aligned incentives and shared intelligence create outcomes that are impossible in a traditional, adversarial investment model. A GP generating Coherence Alpha does more than syndicate deals from their network. They: Architect Coherence Zones: They design and co-found sovereign ventures (Coherence Zones) that solve systemic problems, transforming the GP's role from a capital allocator to a constitutional architect of new markets. Engineer "Staker" Alignment: They use mechanisms like the Stakeholder-to-Staker conversion to structurally align all participants (founders, customers, communities), turning the GP's network into a co-owned economic engine, not just a dealflow source. Measure System-Level Returns: They track success with System Phi (Φ), a physics-grade metric proving the venture creates super-linear value. This provides LPs with a new, rigorous proof of a GP's ability to create value beyond financial engineering. The data shows backing the right managers early is key. The frontier is backing the architects who are building the new operating systems for value creation itself. #VentureCapital #CoherenceAlpha #CoherenceZones #LPs #Innovation #SystemicInvesting

Most venture capital funds don’t make money. That’s not opinion — it’s data. Across the industry, roughly 65% of VC funds return less than invested capital after fees. About 5% of funds generate the vast majority of all industry returns, creating the extreme power-law dynamic that defines VC. Over 20 years, the Kauffman Foundation found that most VC funds they invested in failed to beat public market equivalents, and many returned less than invested capital. Cambridge Associates’ long-term benchmarks show the same pattern: median VC fund IRRs of ~6–8%, top quartile above 20%. (Source: Kauffman Foundation, “We Have Met the Enemy,” 2012; Cambridge Associates VC Index, 2024; a16z analysis of Horsley Bridge data) In other words: a few home runs make the game look winnable — but most funds strike out. 👉 So here’s the question: why do so many smart investors underperform? The answer may lie in what they don’t analyse. VCs talk a lot about investing in people, people, people. And that’s true — great teams matter. But counter-intuitive fact: teams don’t actually generate returns. The intangible assets they create do. Start-ups (and companies generally) hire smart people to create smart things. Those “smart things” — software, data, patents, brand, network effects, know-how, relationships – are intangible assets.  And those assets are actually what drive a venture’s future revenue and enterprise value. People are the pathway to that value. Unless it’s an acqui-hire, when Alphabet etc acquire a start up they are ultimately leveraging the software, network effects, regulatory approvals or brand of the company, not its people. Intangible assets scale, not people. Yet when you look at a typical VC due diligence process, there’s: ✅ Legal DD ✅ Financial DD ✅ Technical DD ✅ People DD ❌ Intangible Asset DD — almost never. This gap exists for many reasons, but the biggest is simple: intangible assets don’t appear on financial statements. And as Peter Drucker warned, “If you can’t measure it, you can’t manage it.” The omission of precisely the assets that drive venture value creates a major blind spot in how many VCs understand and evaluate venture risk. For example, we recently assisted a VC who was preparing an 8-figure follow-on investment in a portfolio company that had passed every conventional DD hurdle and appeared highly promising. Our intangible asset assessment told a different story. When we mapped the venture’s intangible assets, we found they were fundamentally flawed — weak asset ownership, poor defensibility, and high dependency on staff know-how. The conclusion: the company was unlikely ever to achieve scale. The fund walked away. That single insight didn’t just save them 8-figures. It protected the long-term performance of their fund — and its investors. 👉 If intangible assets drive startup value, why do so few VC due diligence processes mention them? #IntangibleAssets #VentureCapital #StartupValuation #Andersenconsulting

I read this with considerable interest yesterday, agreed with it, and then realised it doesn't actually tell you much about what intangible assets actually are. Here's a stab that you could use as a checklist: 1️⃣ People and Culture Human Capital - Your workforce's collective expertise and organisational culture matter more than individual skills. Companies that invest in development and retention programs unlock higher innovation and productivity, creating capabilities competitors can't easily copy. 2️⃣ Data and Intelligence Proprietary Data and Analytics - The real asset isn't just collecting data—it's using proprietary information for real-time decision-making, personalised customer experiences, and optimised operations. This can enable entirely new business models and sharpen your competitive positioning. 3️⃣ Customer Capital Relationships and Loyalty - Deep customer relationships reduce churn, support premium pricing, and generate referrals. This goes far beyond brand awareness to genuine trust and preference that directly impacts revenue. 4️⃣ Operational Excellence Processes and Know-How - Unique internal processes, supply chain optimisation, and specialised expertise create advantages that are hard to replicate. Think efficient logistics networks, proprietary service delivery methods, or streamlined systems that only exist in your organisation. 5️⃣ Network Effects Strategic Partnerships - Strong networks of partners, suppliers, and distributors open new markets, provide resource access, and leverage complementary strengths. The quality and depth of these relationships can accelerate growth significantly. 6️⃣ Innovation Infrastructure R&D Insights and Trade Secrets - Beyond formal patents, the underlying research insights, experimental data, and proprietary methodologies (secret formulas, specific processes) are often hidden but crucial for maintaining your innovation edge. 7️⃣ Adaptive Capacity Organisational Agility - The ability to make holistic decisions quickly, adapt to market changes, and even disrupt your own business model is a learnable organisational capability that ensures long-term resilience and growth. The bottom line These assets create significant, defensible value but rarely appear on financial statements. Companies that systematically identify, measure, and invest in them gain compounding advantages over time. What have you got in place? What works well for you? What's missing? My #postoftheday

For years, 3x in 10 years has been the gold standard for venture investors. 𝐁𝐮𝐭 𝐰𝐢𝐭𝐡 𝐟𝐮𝐧𝐝 𝐥𝐢𝐯𝐞𝐬 𝐬𝐭𝐫𝐞𝐭𝐜𝐡𝐢𝐧𝐠 𝐚𝐧𝐝 𝐞𝐱𝐢𝐭𝐬 𝐭𝐚𝐤𝐢𝐧𝐠 𝐥𝐨𝐧𝐠𝐞𝐫, 𝐭𝐡𝐚𝐭 𝐬𝐚𝐦𝐞 𝐦𝐮𝐥𝐭𝐢𝐩𝐥𝐞 𝐦𝐚𝐲 𝐧𝐨 𝐥𝐨𝐧𝐠𝐞𝐫 𝐛𝐞 𝐞𝐧𝐨𝐮𝐠𝐡.👇 In today’s venture landscape, companies are staying private longer, liquidity windows are narrower, and fund extensions have quietly become the norm. That extra time compounds - and not always in the way investors hope. What looks like the same performance on a MOIC basis can mean something entirely different once duration is factored in. Over the past few years, I’ve reviewed venture funds with very similar multiples but drastically different outcomes once you account for time. A 3x may look strong on paper, but if it takes five extra years to get there, the annualized return can fall from ~20% to ~11% - nearly erasing the excess return LPs expect from venture capital. To test this, I modeled a $100M fund using a standard capital call and distribution curve, measuring IRRs across 2.0x - 6.0x gross TVPI multiples realized between Year 8 and Year 18. The results are clear: 𝐚𝐬 𝐭𝐢𝐦𝐞𝐥𝐢𝐧𝐞𝐬 𝐞𝐱𝐭𝐞𝐧𝐝, 𝐦𝐮𝐥𝐭𝐢𝐩𝐥𝐞𝐬 𝐫𝐢𝐬𝐤 𝐥𝐨𝐬𝐢𝐧𝐠 𝐩𝐨𝐰𝐞𝐫 - 𝐚𝐧𝐝 𝐯𝐞𝐧𝐭𝐮𝐫𝐞’𝐬 𝐢𝐥𝐥𝐢𝐪𝐮𝐢𝐝𝐢𝐭𝐲 𝐩𝐫𝐞𝐦𝐢𝐮𝐦 𝐜𝐨𝐦𝐩𝐫𝐞𝐬𝐬𝐞𝐬 𝐪𝐮𝐢𝐜𝐤𝐥𝐲. 🔍 𝐊𝐞𝐲 𝐈𝐧𝐬𝐢𝐠𝐡𝐭𝐬 1️⃣ 𝐃𝐮𝐫𝐚𝐭𝐢𝐨𝐧 𝐢𝐬 𝐭𝐡𝐞 𝐬𝐢𝐥𝐞𝐧𝐭 𝐦𝐮𝐥𝐭𝐢𝐩𝐥𝐞-𝐤𝐢𝐥𝐥𝐞𝐫. A 3x achieved in 12 years instead of 10 cuts IRR by five percentage points - from 20.4% to 15.3% - and at 15 years, 𝐢𝐭’𝐬 𝐧𝐞𝐚𝐫𝐥𝐲 𝐡𝐚𝐥𝐯𝐞𝐝 𝐭𝐨 𝟏𝟏%. For GPs, it’s a reminder that holding periods and liquidity pacing are performance levers every bit as important as company selection or entry ownership. 2️⃣ 𝐇𝐢𝐠𝐡𝐞𝐫 𝐦𝐮𝐥𝐭𝐢𝐩𝐥𝐞𝐬 𝐜𝐚𝐧’𝐭 𝐟𝐮𝐥𝐥𝐲 𝐨𝐟𝐟𝐬𝐞𝐭 𝐬𝐥𝐨𝐰𝐞𝐫 𝐯𝐞𝐥𝐨𝐜𝐢𝐭𝐲. To maintain a 20.4% IRR after a four-year delay, 𝐚 𝐟𝐮𝐧𝐝 𝐰𝐨𝐮𝐥𝐝 𝐧𝐞𝐞𝐝 𝐭𝐨 𝐭𝐮𝐫𝐧 𝐚 𝟑𝐱 𝐢𝐧𝐭𝐨 𝐧𝐞𝐚𝐫𝐥𝐲 𝐚 𝟔𝐱 - an unprecedented leap in today’s market. For GPs, it underscores how patience alone doesn’t protect returns; speed of compounding and timely distributions matter just as much. 3️⃣ 𝐓𝐡𝐞 𝐢𝐥𝐥𝐢𝐪𝐮𝐢𝐝𝐢𝐭𝐲 𝐩𝐫𝐞𝐦𝐢𝐮𝐦 𝐢𝐬 𝐬𝐡𝐫𝐢𝐧𝐤𝐢𝐧𝐠. Since 1997, the S&P 500’s median long-run annualized return has held steady around 8 - 9%. When a 3x fund slips from 20% to 11% IRR, 𝐯𝐞𝐧𝐭𝐮𝐫𝐞’𝐬 𝐞𝐱𝐜𝐞𝐬𝐬 𝐫𝐞𝐭𝐮𝐫𝐧 - 𝐢𝐭𝐬 𝐢𝐥𝐥𝐢𝐪𝐮𝐢𝐝𝐢𝐭𝐲 𝐩𝐫𝐞𝐦𝐢𝐮𝐦 - 𝐟𝐚𝐥𝐥𝐬 𝐛𝐲 𝐧𝐞𝐚𝐫𝐥𝐲 𝐡𝐚𝐥𝐟. For GPs, it’s a warning that if time risk isn’t managed carefully, LPs may start questioning whether the duration and risk of the asset class are still worth the reward. In venture, how much you earn matters - but how fast you earn it defines the outcome. 𝐖𝐡𝐞𝐧 𝐟𝐮𝐧𝐝𝐬 𝐬𝐭𝐫𝐞𝐭𝐜𝐡 𝐭𝐨𝐨 𝐥𝐨𝐧𝐠, 𝐞𝐯𝐞𝐧 𝐠𝐫𝐞𝐚𝐭 𝐦𝐮𝐥𝐭𝐢𝐩𝐥𝐞𝐬 𝐜𝐚𝐧 𝐥𝐨𝐬𝐞 𝐭𝐡𝐞𝐢𝐫 𝐦𝐞𝐚𝐧𝐢𝐧𝐠. 𝐒𝐢𝐠𝐧𝐚𝐥𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐍𝐨𝐢𝐬𝐞 🤓

Here is an interesting take on how to take exit multiplier with a grain of salt. The rate of return depend heavily on the duration needed to reach that multiplier.

Core VC Fund Terminology 1. Venture Capital (VC): Investment funds that provide capital to early stage, high-growth startups in exchange for equity. VCs aim for outsized returns (3x-10x) despite high risk (~80% startup failure rate). 2. Fund: A pool of capital raised from limited partners (LPs) to invest in startups. Managed by general partners (GPs). 3. Limited Partners (LPs): Investors (e.g., pensions, endowments, wealthy individuals) who provide capital to a VC fund. 4. General Partners (GPs): The fund managers who make investment decisions, source deals, and manage portfolio companies. 5. Carry (Carried Interest): The share of profits (typically 20%) that GPs keep after returning capital to LPs. Only kicks in after hitting a hurdle rate (e.g., 8% return). 6. Management Fee: Annual fee (usually 2% of fund size) charged by GPs to cover operations. E.g., a 100M USD fund might charge 2M USD /year. 7. Portfolio Company: A startup that a VC fund invests in. VCs typically hold equity in these companies as per valuation & investment 8. Cap Table (Capitalization Table): A spreadsheet showing ownership stakes in a startup (founders, VCs, employees). Critical for dilution discussions. 9. Valuation: The estimated worth of a startup. Pre-money (before investment) vs. post-money (after investment). E.g., 10M USD pre-money + 2M USD investment = $12M post-money. 10. Term Sheet: A non-binding agreement outlining investment terms (e.g., valuation, equity stake, voting rights). Often debated in 20VC episodes for “founder-friendly” terms. 11. Dilution: Reduction in ownership percentage when new shares are issued (e.g., in later funding rounds). A hot topic when VCs “overpay” at seed. 12. Exit: How VCs make returns—via startup IPOs, acquisitions (M&A), or secondary sales. Only ~20% of portfolio companies “explode” to deliver big exits. 13. IRR (Internal Rate of Return): Annualized return metric for VC funds. Top funds aim for 20%+ net IRR, median funds hit 10-15%. 14. MOIC (Multiple on Invested Capital): Total return relative to capital invested. E.g., 100M USD fund returning 300M USD = 3x MOIC. 15. Burn Multiple: Ratio of cash burned to revenue growth. High multiples (e.g., 5x) signal inefficiency, a red flag for VCs . #FinancewithSandip

Everyone loves talking about unicorns and returns. But very few understand how a Venture Capital fund actually makes money itself. Not how it invests — how it lives. 👇 A fund has two main income engines 💼💰 💼 Management Fee — the fund’s salary. It covers the team, operations, reporting, and compliance. Usually around 2% of committed capital per year, decreasing as the fund matures. It keeps the lights on — not the partners rich. 💰 Carry (Carried Interest) — the fund’s bonus for performance. Typically 20% of profits above what LPs invested, but only after crossing the Hurdle Rate — usually 6–8% annualized return to LPs. Only when investors reach that minimum, the GPs start participating in profits. Let’s make it real 👇 Imagine a €100M VC fund: The management fee (2%) = €2M per year → pays salaries, audits, and reporting. Over a 10-year lifecycle, that’s roughly €15–18M total in fees (as it tapers down). LPs first must reach the hurdle rate: say 8% annualized, so they receive about €180M before GPs see a cent in carry. The fund ultimately returns 3x = €300M. → LPs get back €180M (their capital + hurdle). → Remaining €120M is profit above the hurdle. → 20% of that (€24M) becomes GPs’ carry. That’s when the GPs really make money. 💡 The takeaway? GPs don’t live off fees. They live for the carry — and they earn it only when their LPs do. ⚖�� The best funds master one thing: balancing fee discipline and carry ambition. That’s how you build not just a fund — but a repeatable investment business. 💬 Hint: GPs — big or small — have skin in the game. They typically invest 1–2% of the total fund themselves. Because alignment in Venture Capital doesn’t start with performance. It starts with commitment. 📈 The invisible side of Venture Capital isn’t boring — it’s where the value is really created.

Radhika Iyengar and Jorden Woods had tire kicked the idea of starting a venture fund for the better part of the last decade.   Finally, in 2025, they were ready. They knew exactly what their thesis would be. They knew some of the early limited partners they would reach out to first. Most importantly: There were a handful of very hot deals they were eager to invest in, and they were lucky enough to have access, thanks to decades of working in their field. One of those things was a “good problem to have.” Access to several hot new deals. You wouldn’t expect that would be a negative for a new venture capital fund. But these deals were closing fast, and if they couldn’t pull the trigger quickly, they were going to lose out. And these deals were so core to their thesis, with such rockstar founders, if they missed out, they’d miss out on a great opportunity to position their fund to future investors. “We were under a lot of pressure,” Jorden says. “We knew it was going to take three, six, nine months just to get the funds set up, and then bank accounts and all of that. We needed a way to do this in two months if we were going to get into these deals.” Emerging managers move quickly, but “quick” means roughly six months to a first close. That was going to be too slow for Radhika and Jorden. “We had this pipeline of very curated high quality deals we knew we could get into,” Jorden says. “But if we missed them, our pipeline would be almost empty.” Fortunately, the Start Fund was invested in 2025. Start Fund allows emerging managers to shortcut the time and cost to form an institutional grade venture capital fund dramatically. The administrative costs are reduced from $100,000 to zero, and the time to start investing is as long as it takes you to raise $100,000. It can be days, not months. It was exactly what they needed for their unique situation. “We had the challenge of: If we missed these deals, what would we invest in?” Radhika says. “But if we did invest in them, we would have a lot of momentum. And fund one is all about building the track record. We want highly performing deals. Start Fund was the only thing that would work.” Even still, it was such a novel way to structure a fund, it sounded almost too good to be true. They did several weeks of due diligence on the concept of the Start Fund, circulating the documents with their network of experts in the venture world. Was there a downside they were missing? “Everyone we talked to in Silicon Valley was like, ‘I’ve never heard of anything like this,’” they said. “But everyone came back with the conclusion that it sounded like the best solution to our problem.”

What's the difference between Venture Capital and Private Equity? Credit to Rubén Domínguez Ibar. Follow him for more content like this. Original post below: _____ What's the difference between Venture Capital and Private Equity? While both Venture Capital (VC) and Private Equity (PE) invest in private entities not listed on public exchanges, they differ in their investment stages in a company's life. VCs generally invest earlier in a company's lifecycle than PE. CJ Gustafson broke it down by investment stages: - Angel Investors: Early support for startups; $10K-$250K; 8-10 years; >75% IRR. - Seed Stage: First major funding for development and growth; $250K-$2M; 6-8 years; >60% IRR. - Growth Stage: Series A-C funding to scale business; $10M-$50M; 5-7 years; >40% IRR. - Late Stage/Crossover: Preparing for IPO, sustainable growth; $50M-$150M; <5 years; 25-35% IRR. - Buyout: Full acquisition, often with debt; variable investment; 3-5 years; >18% IRR. Key takeaway: VC and PE both invest in non-public companies, but at different stages and with different strategies. _____ ♻️Repost to help someone in your network. 🔔Follow Raising Investment for more insights. 🔗Join our community: https://lnkd.in/e_Bv9r2i

At Venture Investors Health Fund we have experienced the impact that funds of funds (FoF) can have on capital availability. Our first experience was with the Venture Michigan Funds, two state sponsored funds of $95M and $120M. That’s big enough to make a large enough commitment to justify opening an office in the state (at least $15M). The idea was to attract experienced firms from out of state and their syndication networks. The commitment couldn’t be more than 25% of a fund and the funds had to invest at least that amount in Michigan. It worked. They stopped collecting data in 2018, but by that time, the funds had invested $264M in 56 Michigan companies. Through syndication, total invested was $1.71B (6.45x). VMF 1 returned 1x by 2018, and VMF 2 was 3x. Annual economic impact had grown to $303M. That data was before HistoSonics, Inc. got FDA approval triggering its meteoric rise. The company may have never gotten off the ground without VMF. Series A had 5 funds, 4 from Michigan, 3 of which opened a MI office because of VMF. Badger Fund is also State funded, but the first fund was only $25M, so they pursued a different strategy of helping launch first time funds, resulting in new funds across the state. We need that too, and it has impacted the number of funds and companies able to get VC backing. NVNG Investment Advisors, LLC is a private effort targeting corporate investors. We need more participants in the asset class, but small institutions and companies can’t always make the scale of investment to get diversification or hire the in house expertise for fund selection. A FoF like NVNG provides that. All different, all playing important roles. To be an Exempt Reporting Advisor, 80% of investments need to be directly into companies, precluding FoFs. The DEAL Act would lower the threshold to 50%, so a FoF that did 50% direct co-invest could qualify, lowering the barrier to formation. Ask Congress to make that happen.