If we take a walk down memory lane to a couple of years ago, "unicorn hunting" was a phrase you'd hear constantly echoing in the halls of VC firms. Fast-forward to 2023, and we ask: isn't it high time that Limited Partners started hunting for Unicorn Managers too? If so, what traits should they seek in their quest?
The term "unicorn" has a fixed meaning: a company with a $1B valuation. Applying this concept to funds, perhaps one should think of a Unicorn Fund as a fund that delivers a 10x return.
Is a 10x fund as rare as a unicorn? And what does the data say a savvy investor should look out for when seeking this elusive 10x TVPI fund?
As part of the registration process for the 2023 RAISE Global Summit, we collected a deep trove of information about fund performance from 656 funds. We removed track records from predecessor funds, SPVs, funds under $1M, and angel track records. We looked only at blind pools with multiple companies.
Here's the surprising part: out of these selected funds, a mere five are presently marked at Total Value to Paid In capital (TVPI) of 10x or more, with the highest fund tipping the scale at a robust 33x. Given that these funds are still maturing and still have potential to reach 10x, we've chosen to widen our "Unicorn" net to any fund with over a 7x Net TVPI. Of the 656 funds analyzed, just twelve currently surpass a 7x Net TVPI, a slim 1.8% of all applicants for the RAISE Global Summit.
These, dear friends, are our true unicorn funds.
If an investor wants to find a unicorn, they should probably focus on Fund I. Of the twelve in our dataset, nine sprouted from a Fund I, with only three coming from a Fund II.
It's notable that unicorns generally are very small funds. Out of the twelve unicorns, only two funds exceeded $20M. The majority of these unicorns raised less $10M, indicating that these are starter funds.
Of course, identifying brand new managers launching their debut fund can be challenging and risky. To assist our LPs, we've reshaped our selection criteria this year to spotlight more potential Unicorn Managers at the conference. We've moved somewhat away from a heavy reliance on firm track records, and are placing increased value on demonstrated personal achievements. Our goal is to introduce LPs to some of the most intriguing individuals launching small starter funds, in addition to a strong selection of more established managers, as these are the ones most likely to morph into unicorn funds.
Would you or sombody you know like to join us at RAISE and meet these remarkable new managers. Ready to embark on your own unicorn hunt at the 2023 RAISE Global Summit?
Click here to learn more and request your complimentary invitation.
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Disclaimer
The Tipping Point Series, including Featured at RAISE articles, (“Tipping Point”) is a collection of interviews with fund managers who (a) have previously raised a venture capital fund and (b) are providing advice and insights into the formation and management of venture capital funds (the “Presentations”). Tipping Point is not an offer to sell or a solicitation of an offer to buy any security issued by any venture capital fund, including without limitation, any venture capital fund managed by Tipping Point’s speakers, presenters, or producers.
The Presentations do not (a) provide investment advice with respect to any security or (b) make any claim as to the past, current, or future performance of any security or venture capital fund, and Tipping Point expressly disclaims the use of the Presentations for such purposes. The Presentations are not intended to constitute legal, tax, accounting, or other advice or an investment recommendation. Prospective fund managers should consult their own advisors about such matters with regard to their venture capital funds. Raising a venture capital fund involves significant risk of loss of income and capital, including loss of the full amount raised and invested, which may occur as a result of identified or unidentified risks.
Tipping Point is produced by Raise Conferences, LLC (“Raise”). Raise is a private invite-only venture capital conference, which provides a forum for venture capital funds to network with and present to potential venture capital investors. Although Raise produces Tipping Point, the Presentations are independent of Raise’s conference and do not provide any forum for the Tipping Point speakers, presenters, or producers to solicit the sale of any securities.
