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My Journey to Raise a Venture Capital Fund in Houston – Nosecone Ventures

My Journey to Raise a Venture Capital Fund in Houston

Blog post from a venture capital fundraiser, kirkoburn,  worth reading: “My Journey to Raise a Venture Capital Fund in Houston”.

 

An excerpt: ”

IV: Fund Vision and Goals: Cash on Cash Return vs. IRR

I set the fund’s vision to become the best performing fund. I was told numerous times by institutions and others that the best fund managers have a stellar first time fund. I was not going to escalate my commitment to this without understanding the bar. With my experience in SURGE and after numerous meetings with institutional investors (discussed below), I believed that Cash on Cash Return was the best metric to measure and to plan for in our fund. (There is a longer discussion about how to “game the system” when investing (i.e. investing into a late stage deal for the quick hit) but we never got this far. Andreessen Horowitz’s first time fund which was marketed for early stage put money into Skype ($50M loan) and Fusion-io ($45M Series C) and was able to show a greater than 2X return. Again, Cash on Cash speaks louder than any other metric.

I pulled data from a local institutional investor to look at actuals. For example, this report from 2011 shows UTIMCO’s private equity investments…SCF Partners (Houston’s icon and the best oilfield services investor) is the best performing fund manager when it comes to returning cash back to UTIMCO. And investors love to get paid. While Union Square is the best performing fund manager in regards to IRR (an academic metric), they have only returned 38% of the cash taken from UTIMCO while SCF Partners has returns almost 2X the cash.”

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