CHAPTER 7Finding the Highest Quality Investments at the Right Price

Venture capital investing is a difficult business. An investor must be smart, lucky, and know how to play the game to achieve outsized returns.

We told you earlier that venture capital fund returns have averaged about 12% per year over the long term and 19.7% over the past 20 years according to the Thomson Reuters Venture Capital Research Index. Nevertheless, returns on individual deals, and even on pooled funds holding a number of ventures, can vary considerably from negative to highly positive.

Len's various funds and investment pools over 30+ years have delivered gross annual returns ranging from 14% to 159%. We had to be both good and lucky to never have a losing fund.

Investing in individual deals, though, is difficult, and that's what VC firms do. The venture capital industry norm is that only about 15–20% of all investments will make any money at all, and about half of those money makers will be considered home runs, returning five times the money invested or greater. As we've said more than once in this book (sorry for the repetition, but we're proud of our record), our record is better, with over a third of our investments making some money and almost half of those money makers considered big home runs, with either an IRR of 100%+ or a return multiple on the money invested of greater than 10. Four of our investments and/or companies that we have helped start have reached values of over $1 billion, ...

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