:bank:How VCs can increase their MOIC (Multiple on Invested Capital)
:thinking_face: Viable Advice by VC Industry Expert Henri Pierre-Jacques.
:thinking_face: Viable Advice by VC Industry Expert Henri Pierre-Jacques.
1 reply
Monday, October 31, 2022
I love the concept of fee recycling, as it is a win-win for both the LP and GP.
The problem is the timing.
1. If startups aren't expected to exit for 7-10 years (in my model with Pre and Seed), then the recycling doesn't come till late in the fund ... well after the active investment period.
2. If the fund does new invests 7-10 years later, then these new companies won't be expected to exit for another 7-10 years ... well after the management fee is complete and LPs have expected their returns.
It's a great concept, and well suited for evergreen structures, but is problematic for traditional 10 year funds.
The problem is the timing.
1. If startups aren't expected to exit for 7-10 years (in my model with Pre and Seed), then the recycling doesn't come till late in the fund ... well after the active investment period.
2. If the fund does new invests 7-10 years later, then these new companies won't be expected to exit for another 7-10 years ... well after the management fee is complete and LPs have expected their returns.
It's a great concept, and well suited for evergreen structures, but is problematic for traditional 10 year funds.
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