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Art by Sam Lessin.
Modest Proposals
Venture Capital

What Everyone Is Missing about Venture Returns

Photo: Art by Sam Lessin.

It was interesting to watch the back and forth last week between the Wall Street Journal and Andreessen Horowitz about venture fund performance. The entire exchange seemed to miss entirely the reality of how LPs and founders value venture funds and the actual process by which funds aggregate and deploy capital.

The WSJ made the point that the A16Z funds trail the “top-tier” marked returns of funds like Sequoia, Benchmark, and Founders Fund. A16Z shot back, saying that you can’t compare across funds because they use different valuation methodologies in how they report illiquid, unrealized returns to investors. It also attacked the idea of calling marked unrealized gains “returns.”

The reality is that this debate is irrelevant to both LPs providing financing and founders taking it.

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