VC Fund Models — A European [LP] Investor Perspective. Pacenotes insights.
There are VC funds and then there are VC funds: nuances differ greatly per fund but have a large impact on fund performance over time. Given the fact that in VC “the best seeds bear the most fruits” or in VC language “the strong power law return distribution” it is important for VCs, LPs and even founders to understand the nuances between VC fund models that are used to increase the chances of success.
“It is very natural for investors to just focus on the individual deals that they are chasing. What sets apart more experienced teams is a very deliberate and dynamic approach to looking at the portfolio / fund model angle as well”Michiel Kotting, General Partner at Northzone
In recent years the development of the European VC ecosystem has been mainly driven by the increasing quality of the ventures, fuelled by the growing experience of (serial) entrepreneurs. These developments together with a strong economic cycle has resulted in a prosperous 10-year period for VCs in which they were able to invest in great companies such as UiPath, Klarna, Hopin, WeFox, Transferwise, Flixbus, Revolut and N26. The experience gained by fund managers during this period resulted in the improvement and sharpening of their investment strategies and fund models.