Fund returner

A single portfolio company whose exit proceeds alone equal or exceed the total size of the fund that invested in it.

Example

A 100,000,000 fund owning 7% of a company that sells for 1,500,000,000.

Venture funds typically need at least one such outcome to reach strong returns.

Power-law distribution — An outcome pattern in which a very small number of results account for most of the total, rather than results clustering around an average.
Carried interest — The share of a fund's profit that the manager keeps, conventionally around twenty percent, usually payable only above a defined return to investors.

One investment can decide the return of twenty — Venture portfolio returns follow a power law: most of the money comes from very few companies. Working through a portfolio's arithmetic shows why missing the best company matters more than avoiding the worst. (11 min)
A fund must return far more than its investments cost to deliver its target to investors — Fees, carried interest and reserves mean a venture fund's portfolio must earn a much higher gross multiple than the net multiple its investors receive. Working backwards shows what a fund needs from its best companies. (12 min)