Venture Capital and Private Equity from Josh Lerner . The objective of VC is to generate high rates of return over long periods of time. The major negatives of investing in VC are long time frames, lack of liquidity, and high management fees. VC firms typically manage multiple funds formed over intervals of several years. Funds are illiquid but as companies in the portfolio go public or are sold, the investors realize their returns.
Funds typically consist of limited partnerships invested in a number of companies.
The big winners yield 10 or more times the original investment. Venture funding and returns have been unprecedented in recent years and some experts believe venture capital is currently enjoying a phenomenal boom that will lead to a slowdown. Many are projecting single digit returns for the near future, but others believe high returns will continue. Many VC firms have reported even higher returns in the last few years and the internet has produced scores of success stories that have yielded remarkable short term returns for VC firms. Although the firm almost failed with its first fund, it has gone on to become a premier early-stage investing firm.