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César Beltrán Miralles

VC funding is a high-stakes game that startup founders need to understand, as it involves managing investor expectations and aiming for exponential returns. 💼 Venture Capital 101: A VC fund is essentially a pool of money from Limited Partners (LPs) – think pension funds, family offices, and endowments. General Partners (GPs) are the venture capitalists managing these funds, investing in startups and aiming to generate significant returns. 📈 Money Makers: GPs earn through two key streams—management fees (around 2% annually of the fund size) and carried interest (carry), which is typically 20% of the profits. This creates a strong incentive to turn a $100 million fund into $500 million or more. ⏳ The Clock is Ticking: VC funds usually have a 10-year lifespan, with 3-5 years for initial investments and the rest focused on follow-ups and exits. GPs need to raise new funds every 2-4 years to keep the lights on and continue earning management fees. 🎯 High-Pressure Performance: The key metrics VCs are judged by include IRR (Internal Rate of Return), DPI (Distributions to Paid-In Capital), and TVPI (Total Value to Paid-In Capital). These determine whether LPs will back GPs in future funds, pushing GPs to pursue outsized returns. 🚀 Unicorn Hunting: The "power law" dominates VC strategy—where only 1-2% of investments are expected to return 50x or more. VCs seek out startups with the potential for massive market domination, not just profitable businesses. 🏆 What VCs Look For: Startups with huge market potential (TAM in the billions), a scalable business model (often in tech or SaaS), a strong founding team, and an innovative advantage are most likely to attract VC interest. 🔥 Growth on Steroids: VCs often push founders to raise another round within 18-24 months to increase their investment’s value on paper, making growth the top priority. While this can drive hypergrowth, it also puts immense pressure on founders to deliver rapid results. ⚖️ The Flip Side: If your company fails, it's not necessarily the end. VCs understand that many investments won't succeed, and if you've shown competence, they may back you again in future ventures. 💡 Is VC Right for You?: Before diving into VC funding, ask yourself if your startup can realistically meet the high-growth demands and massive return expectations. Taking VC money means not just capital, but also a commitment to fast scaling and frequent fundraising. #startups #venturecapital #growth 💸 High Stakes, High Rewards: VCs aren't looking for steady, profitable businesses—they're looking for unicorns that can grow fast and deliver outsized returns. 💡 Metrics Matter: Top VCs need to show strong IRR, DPI, and TVPI to raise new funds and keep LPs happy. ♻️ Repost if you enjoyed this post, and follow me César Beltrán Miralles for more curated content about leadership! https://lnkd.in/g7DbGwwS

VC Math Explained To Founders: The High-Stakes Game Of Startup Funding

VC Math Explained To Founders: The High-Stakes Game Of Startup Funding

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