Venture Capital Return Calculator

A venture fund is arithmetic about a small number of survivors. On the defaults, 20 deals at 1,000,000 each puts 20,000,000 to work; a 70% failure rate leaves 6 of those deals alive; at 10x each they return 60,000,000. That is a MOIC of 3.00x, and spread across a seven-year hold it annualises to 16.99%.

The break-even multiple the survivors have to clear

Six winners have to return the whole 20,000,000 between them to break even, which is 3.33x each. Above that line the fund makes money and below it the fund loses. The MOIC is just the winner multiple divided by that break-even multiple: 10 over 3.33 is 3.00. That framing is more useful than the failure rate on its own, because it says what the survivors have to do rather than how many there are.

Winners come in whole numbers

So the failure rate moves the result in steps rather than smoothly. At 20 deals, 67% and 70% both leave 6 winners and both return 16.99%. Drop to 65% and a seventh winner appears, taking it to 19.60%. Raise it to 75% and one disappears, taking it to 13.99%. On a small portfolio the failure rate is a coarse dial, which is itself part of the argument for making more investments rather than fewer.

The hold period does as much work as the picking

The same 3.00x annualises to 24.57% over five years, 16.99% over seven and 11.61% over ten. Identical deals, identical outcomes, thirteen points of spread in the headline figure. What that figure describes is narrow: the return of a pattern where all the money goes in at once and all of it comes back together at the end. Real funds call capital over several years and distribute over several more, so a reported fund IRR reflects when cash moved as much as what the deals did.

The output is gross

No management fee or carried interest is modelled anywhere in it. A 20% carried interest on the profit above cost alone takes a 3.00x gross to 2.60x, and the annualised figure from 16.99% to 14.63%; management fees come out on top of that. Kaplan and Schoar, studying US private equity partnerships, found average fund returns net of fees roughly equal to the public market over their sample, alongside a large degree of heterogeneity and strong persistence across funds raised by the same partnership. Harris, Jenkinson and Kaplan revisited the question across nearly 1,400 US buyout and venture funds using cash-flow data. The gap between a gross model like this one and a net outcome is where most of the argument about the asset class sits.

Fund size is not in the arithmetic

Deployed capital is the deal count multiplied by the check size, so on the defaults the two agree at 20,000,000, but 20 deals of 2,000,000 against the same 20,000,000 fund deploys 40,000,000 and the tool reports on the 40,000,000 without saying so. The result panel shows both figures, and nothing in the calculation reconciles them.

What sits outside

Follow-on investments and the reserves held for them, dilution across later rounds, partial write-offs rather than total losses, winners that differ from each other rather than sharing one multiple, exits that arrive years apart, capital recycling, currency, and everything about how the deals were chosen in the first place.