VC Orphans - NUOPTIMA Model on Improving Returns for VCs

	B	C	D	E	F	H	I
1
2	"Back of the Envelope" Model
3	The model below is a purely hypothetical calculation of how a change to the expected return of low-performing assets might impact the returns of a venture capital fund.
4	The model is highly simplified and does not include factors such as follow-ons, management fees and/or carry.
5	There is no guarantee that a venture capital fund will achieve such returns. Investors in venture capital funds face a risk of total loss of invested capital.
6
7	Fund Size (€)	50,000,000
8	Target Multiple (Gross)	3.00x
9	# of Portfolio Companies	40
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11	Base Case: Typical VC Fund with a target 3x Gross Multiple
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13	Portfolio Breakdown	# of Companies	% of Fund	Avg. Return	Return Contribution
14	Outlier Return	1	2.5%	50.00x	1.25x
15	Positive Return	13	32.5%	4.88x	1.59x
16	Partial Loss of Capital	13	32.5%	0.50x	0.16x
17	Significant Loss of Capital	13	32.5%	0.00x	0.00x
18	Total Fund	40	100.0%		3.00x
19	Net Returns (EUR)				150,000,000
20
21	(Average Positive Return is "backsolved" from 50x Outlier Return and 0,5x/0,5x Return for the other two categories.)
22
23	Scenario 1 (PRO): Slight Increase in Return of Underperforming" Assets - uplift by 0,25x
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25	Portfolio Breakdown	# of Companies	% of Fund	Avg. Return	Return Contribution
26	Outlier Return	1	2.5%	50.00x	1.25x		No Change
27	Positive Return	13	32.5%	4.88x	1.59x		No Change
28	Partial Loss of Capital	13	32.5%	0.75x	0.24x		Increase from 0.5x
29	Significant Loss of Capital	13	32.5%	0.25x	0.08x		Increase from 0.0x
30	Total Fund	40	100.0%		3.16x	5.42%	Increase in Fund-Level Return (%)
31	Net Returns (EUR)				158,125,000	8,125,000	Increase in Net Returns (€)
32
33	Scenario 2 (PRO): Significant Increase in Return of Underperforming" Assets - uplift by 0,5x
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35	Portfolio Breakdown	# of Companies	% of Fund	Avg. Return	Return Contribution
36	Outlier Return	1	2.5%	50.00x	1.25x		No Change
37	Positive Return	13	32.5%	4.88x	1.59x		No Change
38	Partial Loss of Capital	13	32.5%	1.00x	0.33x		Increase from 0.5x
39	Significant Loss of Capital	13	32.5%	0.50x	0.16x		Increase from 0.0x
40	Total Fund	40	100.0%		3.33x	10.83%	Increase in Fund-Level Return
41	Net Returns (EUR)				166,250,000	16,250,000	Increase in Net Returns (€)
42
43	Scenario 3 (CON): Slight Increase in Return of Outlier Asset - Uplift of Return by 10%
44	What increase in the outlier return is necessary to match the (perhaps more work-intensive) uplift of spending time on underperforming assets?
45
46	Portfolio Breakdown	# of Companies	% of Fund	Avg. Return	Return Contribution
47	Outlier Return	1	2.5%	56.50x	1.41x	13.00%	Increase from 50x
48	Positive Return	13	32.5%	4.88x	1.59x		Increase from 4.88x
49	Partial Loss of Capital	13	32.5%	0.50x	0.16x		No Change
50	Significant Loss of Capital	13	32.5%	0.00x	0.00x		No Change
51	Total Fund	40	100.0%		3.16x	5.42%	Increase in Fund-Level Return (%)
52	Net Returns (EUR)				158,125,000	8,125,000	Increase in Net Returns (€)
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