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Monday, February 27, 2006
Fred Wilson earlier wrote venture capital is patient capital.Highlighting that even the most patient investors can get tired of supporting an investment, often called "deal fatigue", he points out the typical life cycle of a venture deal is five to seven years. The returns in ventures can be negative in the early years, get positive in year 3 or 4, and then grow from there, typically called the J curve – this can also show the typical annual cash flows of a startup company. They are negative for two to four years, turn positive, and grow from there, thereby creating value for the entrepreneurs, operators, and investors. Other way to put it - The IRR curve over time for an early stage VC fund – that period of time in advance of mass-confirmation of a new idea. Nick points to the classic J-Curve available from the CalPERS site.
Category :Private Equity, Emerging Trends |
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