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Target returns communicated to LPs

I just got this questions from a potential LP: 

What should i assume in terms of overall MOIC and target timing? Appreciate exits are hard to predict, but what should be the target based on the seed-stage VC asset class? 3-5x MOIC and some liquidity in 10-12 years? 

How would you answer this?
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Answered by

Community Member

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Avoid promising targeted returns to LPs. You may want to model out some returns based on your strategy showing High, Medium, Low scenarios at some point, but the answer to the LPs should be: "I will share our deck which will describe several returns scenarios for our fund. Since VC fund returns have asymmetric upside and follow a Pareto distribution, one successful investment can be the difference between a 10x+ on the fund and a 2x"

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