Is 3x a good venture return? It depends entirely on the stage you invest in and your “batting average”.
Most people know that “batting average” is the percent of times you get on base (based on the number of times at bat). In VC parlance, the batting average is the number of times you make a successful investment divided by the total number of investments you make.
Let’s call a “successful investment” one that you get at least your money back. That’s not really accurate, but let’s do it anyway.
If you are a late stage investor, like IVP or TCV (two of the better known Silicon Valley late stage firms), then your batting average is very close to 100%. You wait until the early stage risk (technology, team, market) is wrung out of a deal and you invest on a set of price and terms that almost insures you’ll get your money back and you attempt to make three to five times your investment if everything works out right. Since there are very few total losses in the portfolio, a 3x on average would be a good return for someone with a 100% batting average.
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