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The Early Newsletter | 13th Edition

Happy Friday! An exciting announcement today.. we’re piloting a VC candidate portal for those looking for a role in VC! 🎉 

The portal is free to join, and you can sign up here to be added to our waitlist. In the future, we’ll send jobs that fit your interests and also ping you if there’s interest in your profile from participating VC firms 👀 

Now, let’s get into today’s newsletter ⬇️ 

Check out this post of the week by Alex Pattis, Founder of Last Money In Media and GP at Riverside Ventures. He shares insights on the VC scout role and success stories of scouts-turned-partners 💪 

💹 Today’s schedule:

• New VC Roles This Week 💫

• 4 Key Metrics to Measure VC Fund Performance ⚖️

  • Key Terms: Paid-In Capital, Distributed Capital, & more

  • Key Metrics: MOIC, TVPI, DPI, & IRR

• Additional Resources on VC Metrics 🧠

• Poll: Rate This Newsletter 💭

• Refer a Friend 🙂

• Resources 📝

• Say Hi 👋

New VC Roles This Week 💫 

Internships 🤓 

• VC Analyst Fellow @ Theia Ventures (Bangalore) - Apply Here

• VC Fellow Spring 2024 @ Fusion Fund (Remote or Bay Area) - Apply here by May 1st

• Analyst Intern @ Dreamcraft Ventures (Copenhagen) - Multiple Roles

  • Investment Analyst Intern - Apply Here

  • Technical Analyst Intern - Apply Here

• Healthcare VC Fellow @ Vertex Ventures (Remote) - Apply Here

• Summer Associate @ Kapor Capital (Oakland, CA) - Apply Here

• VC Intern @ Bosch Capital (Sunnyvale, CA) - Apply Here

Analyst 😍 

• Analyst @ Touchdown Ventures (Multiple Locations)

  • San Francisco, CA - Apply Here

  • Philadelphia, PA - Apply Here

• Investment Analyst @ Macquarie (Berlin, GER or London, UK) - Apply Here

• Analyst/Sr. Analyst @ Orios Venture Partners - Apply Here

Associate/Senior Associate 😄 

• Investment Associate, Compute @ Playground Global (Palo Alto, CA) - Apply Here

• Investment Associate, Engineered Biology @ Playground Global (Palo Alto, CA) - Apply Here

• Investment Associate, Cybersecurity & Privacy @ Munich Re Ventures (San Francisco, CA) - Apply Here

• Ventures Associate @ Point72 Ventures (New York, NY) - Apply Here

• Associate @ Cocoon Capital (Singapore, SG) - Apply Here

• Investor @ January Capital (Singapore, SG) - Apply Here

Operational Roles 🤠 

• Business Ops Analyst - Cyber & Defense @ Red Cell Partners (Tysons Corner, VA) - Apply Here

• Program Associate @ Techstars (Multiple Locations):

  • San Francisco, CA - Apply Here

  • Baltimore, MD - Apply Here

  • New York, NY - Apply Here

Roles Still Open From Last Week 🏃‍♀️ 

• Analyst @ Forum Ventures (New York, NY) - Apply Here by April 17th

• AI Intern @ Obvious Ventures (San Francisco, CA) - Apply Here

• Summer Associate @ Prologis Ventures (San Francisco, CA) - Apply Here

• Sourcing Associate @ Techstars (New York, NY) - Apply Here

• Consumer Investor @ Stripes (New York, NY) - Apply Here

• Deal Operations Associate @ OMERS Ventures (Toronto, New York, or Palo Alto) - Apply Here

• Marketing Associate @ Next Legacy Partners (Palo Alto, CA) - Apply Here

• Marketing Associate @ Reach Capital (San Francisco, CA) - Apply Here

❗️ Note that many VC roles are posted without application deadlines and filled on a rolling basis - if you see one you like, I’d recommend applying within a week, or as soon as possible!

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4 Key Metrics to Measure VC Fund Performance ⚖️ 

💡 This week, we’re breaking down a few of the most widely-used metrics to measure VC performance. These metrics are generally split into two categories:

1. Multiples, which help express a portfolio’s total value without taking time into account - includes MOIC, TVPI, and DPI

2. IRR Calculations, which include time and show when and how much a fund will return from its investments - includes IRR variations

✍️ A few key terms to know:

• Distributed Capital: The total of all money distributed to LPs by a fund to date

• Called Capital: If an LP commits $10M to a VC fund, they don’t typically provide that full amount upfront. VC investors instead “call capital” from LPs over the course of a fund when they need it to invest

• Paid-In Capital: The total capital called by investors from LPs to date for a given fund

• Residual Value: The estimated value of the investments remaining in a fund that have not yet exited 

It’s helpful to combine multiple metrics to get the most complete view of fund performance ⬇️ 

Multiples 🎯 

1) Multiple on Invested Capital (MOIC) - MOIC compares the current value of your investment to the total amount of capital you invested originally.

🗒️ When It’s Used: MOIC is often used as a gross metric to compare performance across different firms, since it does not take timing/age of fund into account.

🔢 Formula: (Realized Value + Unrealized Value) / Investment Cost

💡 Example: If you invested $1M and the investment’s total value has increased to $1.5M, the MOIC is 1.5X ($1.5M/$1M).

2) Total Value to Paid-In Capital (TVPI) - TVPI measures the current value of a fund’s remaining investments by dividing the total value of all distributions of the fund by the total capital put into fund investments. This shows the profit an investor has made relative to their initial investment, based on the fund’s current value.

🗒️ When It’s Used: TVPI is used by GPs and LPs to determine the total amount of capital a fund could return at a given point. It is often used by GPs to calculate the total value of a fund before distributions are made, allowing GPs to show investment valuation step-ups to LPs.

🔢 Formula: (Distributed Capital + Residual Value) / Paid-In Capital

💡 Example: At the 3-year mark, LPs have contributed $5M into a fund. The fund has distributed $400k back to LPs, and the GP estimates a residual value of $4M.

Add the residual value ($4M) and distributions ($400k) to get a total value of $4.4M. Then, divide this number by total paid-in capital ($5M) to get a TVPI of 0.88X.

Since TVPI is below 1X, the investment has lost value - in this case, it has lost 12% of its value since inception. It is common to have a TVPI of <1X in the first few years of a fund. (If TVPI is above 1X, it means the investment grew in value.)

3) Distributed to Paid-In Capital (DPI) - DPI measures the amount of cash that has been returned to investors (e.g. the return multiple) relative to capital called at any point in time. DPI can be calculated net or gross.

 🗒️ When It’s Used: DPI is used to understand how well a fund returns capital relative to the capital called (it does not take into account unrealized value.) At the end of a fund’s lifecycle, only DPI remains (not TVPI), since there is no longer any residual value to calculate.

🔢 Formula: Gross DPI = Distributed Capital / Paid-In Capital ➡️ Net DPI = (Distributed Capital - Total Fees and Expenses) / Paid-In Capital

💡 Example: It’s been 4 years since a fund opened, and investors have contributed a total of $40M. The fund has distributed $10M to investors from realized gains. The DPI would be calculated as $10M/$40M, or 0.25x. This means, at the end of the fourth year, the fund has returned 25% of the capital investors have paid in so far.

DPI can be calculated both net (including the impact of mgmt. fees, carried interest, and other fund expenses) and gross (not accounting for any of these variables.)

A DPI greater than 1X shows an overall increase in capital from what LPs invested, or a positive return. Below 1X means the fund has yet to return the amount of capital it has called from LPs.

IRR Calculations 🤓 

1) IRR (Internal Rate of Return) - IRR measures the annual growth rate a fund or investment generates, or is expected to generate.

🗒️ When It’s Used: IRR is used to help vet fund performance on an annual basis by taking into account the time value of money (which MOIC does not.) An IRR of anywhere from 20-30% and above is a standard target for a VC fund. The higher the IRR, the better a fund is performing.

IRR can be classified in multiple ways (realized, unrealized, gross, net.)

🔢 Formula: IRR is calculated by finding the annual rate of return an investment must hit to make NPV (net present value) equal to zero. To make the calculation, VCs estimate their fund’s cash flows over the period being measured. See below for the full formula ⬇️ 

💡 Example: Here is a realistic example of a VC IRR calculation.

*Note: You can calculate IRR for an individual investment (one company), groups of investments, or an entire fund - VCs tend to track all of the above.

Additional Resources on VC Metrics 🧠 

• VC Economics (AngelList)

• Internal Rate of Return: What You Need to Know (AngelList)

• How VCs Measure Fund Performance (Carta)

• Key Metrics for Informed Private Capital Investors (BIP Ventures)

Poll: What Did You Think of Today’s Newsletter? 💭 

Refer a Friend 👭 

Enjoying the newsletter? Click the button below to refer a friend 🙂 

Resources 📝 

• Download my meeting notes template for VC/investment pitches 🧠

• Check out my previous post for a list of VC interview resources that I use!

• Take a look at the Early VC job board with roles updated twice weekly 🤗 

• Check out Lazy Girl Capital, an awesome newsletter focused on female founders and investors 💗 

Say Hi! 👋 

And that’s all for this week! You can find me on LinkedIn and X. As always, feel free to reach out to [email protected] with any questions and/or feedback. I’d love to hear from you! 🙂 

-Mic