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Andreessen Horowitz Returns Slip, According to Internal Data

theinformation.com

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Re: Andreessen Horowitz Returns Slip, According to Internal Data

#41

Post by breck »

dawhizkid wrote: post #15

See link to a chart on returns by year/fund from the article: https://twitter.com/vcstarterkit/status/1173611439833006080

That looks pretty good to me. One dumb math question: when is a good time to compare against something like an S&P benchmark and should annualized rates or absolute growth be compared? In other words, is Fund I "cashed out" now, or could it's 44% return go up? Just doing simple math, adding 1 year to a CAGR calculation and doubling the FV of Fund I from 12B to 24B, seems to jump the return rate only to 48% from 44% (even though that more than doubles the profits). So would it be better to compare the absolute growth of the S&P to the growth of a fund, instead of the rate of return?

Re: Andreessen Horowitz Returns Slip, According to Internal Data

#42

Post by mbesto »

vasilipupkin wrote: post #39
mbesto wrote: post #32

I don't have access to the full article, but from the lede this looks like not very well researched journalism: 1. A16Z has 17 funds, with varying degrees of investing angles (early stage, crypto, bio, etc). So trying to do a fund by fund analysis is unfair. 2. IRR can be deceiving as it's time based. Some LPs invest based on "X Return" or IRR, and so cherry-picking one over the other is disingenuous without mentioni…

doing a fund by fund analysis is not unfair as funds are marketed to LPs separately. It does me no good that fund ABC had 30% IRR if fund XYZ that I am invested in from tbe same brand of manager is earning 1.5% IRR. "IRR can be deceiving as it is time based". No, it's the other way. A return without mentioning how long it took to earn it is deceiving.

> A return without mentioning how long it took to earn it is deceiving.

Except that this is how some LPs want it to be reported, so how do you explain that? If you want to do a comparison to stock market returns ("seeking alpha") then sure, IRR makes sense.

Re: Andreessen Horowitz Returns Slip, According to Internal Data

#43

Post by mbesto »

seem_2211 wrote: post #38
mbesto wrote: post #32

I don't have access to the full article, but from the lede this looks like not very well researched journalism: 1. A16Z has 17 funds, with varying degrees of investing angles (early stage, crypto, bio, etc). So trying to do a fund by fund analysis is unfair. 2. IRR can be deceiving as it's time based. Some LPs invest based on "X Return" or IRR, and so cherry-picking one over the other is disingenuous without mentioni…

I don't think this is poor journalism (I think The Information do a good job reporting industry specific information in a non click baity way). I see this as reporting on a player in an industry that a substantial number of their subscribers are either exposed to, or interested in. But I agree with the rest of your statements. Better to have a VC investment that brings a 12% return or whatever than some negative retu…

> I see this as reporting on a player in an industry that a substantial number of their subscribers are either exposed to, or interested in.

Except the implication of the article is that A16Z funds are getting "worse" and thus underperforming ( = "A16Z must be a bad firm") making it newsworthy. I am far from an A16Z fanboy, but this is not newsworthy.

Normally business journalists refer to industry expert (for example, an LP analyst) to determine whether "is this bad or good?" rather than what appears to be "IRR is down, this must be bad".

Re: Andreessen Horowitz Returns Slip, According to Internal Data

#44

Post by glaive123 »

ryanSrich wrote: post #16
josu wrote: post #14

Is there a way to pay per article, or do I have to buy the $999 yearly subscription?

You can sign up for $1/m for 3 months if you have a referral link. I don’t have one handy, but searching on twitter you can usually find one.

http://thein.fo/r/jessica

Found in the Founder's twitter bio

Re: Andreessen Horowitz Returns Slip, According to Internal Data

#45

Post by thesausageking »

breck wrote: post #41
dawhizkid wrote: post #15

See link to a chart on returns by year/fund from the article: https://twitter.com/vcstarterkit/status/1173611439833006080

That looks pretty good to me. One dumb math question: when is a good time to compare against something like an S&P benchmark and should annualized rates or absolute growth be compared? In other words, is Fund I "cashed out" now, or could it's 44% return go up? Just doing simple math, adding 1 year to a CAGR calculation and doubling the FV of Fund I from 12B to 24B, seems to jump the return rate only to 48% from 44% (…

Venture funds typically take 10-15 years for the investments to cash out. It's been close to 10 years for fund II, but I believe they invested in Foursquare and AirBnB, so depending on how those companies do it could change their returns.

In general, it's hard to answer questions based on this chart. In addition to IRR, VC funds are judged on two other key numbers:

TVPI (Total Value to Paid In) which is the total value of all of the fund's investments divided by the capital LPs have put into the fund, both realized and unrealized. For the latter, LPs will often look at the investments themselves and make their own determination of value. Especially in this environment, many funds have investments in unicorns that are inflated and never end up being realized. A fund with a $800m TV may not actually look great if a large % of that is in WeWork and is based on a $40B valuation. This is also the case for IRR.

DPI (Distributions to Paid In) which is the total amount of cash a VC fund has sent to LPs divided by the amount of the LPs paid into the fund. At the end of the day, this is the most important number as it's what the fund's investors make, but it can take 10-15 years for a fund to completely distribute everything, so it's not that useful unless the fund has been around a long time.

Re: Andreessen Horowitz Returns Slip, According to Internal Data

#46

Post by pmart123 »

breck wrote: post #41
dawhizkid wrote: post #15

See link to a chart on returns by year/fund from the article: https://twitter.com/vcstarterkit/status/1173611439833006080

That looks pretty good to me. One dumb math question: when is a good time to compare against something like an S&P benchmark and should annualized rates or absolute growth be compared? In other words, is Fund I "cashed out" now, or could it's 44% return go up? Just doing simple math, adding 1 year to a CAGR calculation and doubling the FV of Fund I from 12B to 24B, seems to jump the return rate only to 48% from 44% (…

Well, once cash is returned to the investor, using cash returned on the initial capital base to calculate a compound annual return is the best way. This would allow you to compare the fund’s return to a public market index over the time period. Before this happens, there is no best or one way.
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