![]() Note that venture capital is often a subset of "Private Equity", which in turn falls under "Alternative Investments". In this post, I will lay out each LPs underlying "business model" and cash flows, as well as their appetite for venture capital. everyone expects high IRR but some expect VCs to address socio-economic or environmental goals. Total Return - How is the total portfolio value increased and surplus generated?.Current Income - What cash flows do LPs expect from their entire portfolio? Does the need / pressure for cash flow trump long term capital gains?.Capital Appreciation - How do LPs expect their capital to grow? At what rate per annum?.Capital Preservation - How do LPs minimize their risk and ensure their principal amounts stay safe?.To put it in LP jargon, the four criteria LPs care about are: ![]() Some are bold and can bet the farm and some make decisions quickly (family offices - if you talk to a family member). Some need a steady stream of cash flows (annuities in pension funds) and other are risk-averse (insurance companies).
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