Big vs. Small - an Entrepreneur’s Primer

Posted by Jeff Bussgang on November 18th, 2007 filed in Uncategorized

I enjoyed Scott Kirsner’s post on fund size, “Big vs. Small”.

Here’s a good rule of thumb for entrepreneurs: early-stage VCs should have $40-60m in capital per general partner per fund. The math goes like this:  VC general partners do 1.5-2 deals per year over the four year investment period of a fund, or 6-8 deals per partner. For an early-stage firm, $6-8m per deal is a good amount (including reserves; this means total capital raised is $10-25m over the life of the start-up). That pencils out to $40-60m per GP per fund.When we raised our $180m 2nd fund, we were 3 partners but had an intent to hire a fourth over the life of the fund (which we did, my fellow blogger/partner david aronoff). Thus, we decided to keep the fund size below $200m to stay true to our early-stage focus.

If an entrepreneur sees a fund where the general partners are managing $60-80m each or more, you can assume your $3-5m Series A deal will not be at the top of the list in the weekly partners meeting!

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