YC Partner Geoff Ralston talks to Cowboy Ventures Founder Aileen Lee. Transcript and additional content can be found here:

See Min 26 - for VC math

" the people who have, especially if you're going to go for institutionally backed dollars, whether it's a seed fund or a larger venture firm, when we take money from professional investors we have to basically … To be a top quartile fund, we have to deliver a certain return. Top quartile returns for more recent ventures, vintages, or let's say for a Forex return. If someone has $100,000,000 fund, they have to figure out how to generate $400,000,000 to be able to raise money in the future. That $400,000,000 is going to be a combination. Let's say if 30 different companies two to four, which are going to wind up being great and...

YC Partner Geoff Ralston talks to Cowboy Ventures Founder Aileen Lee. Transcript and additional content can be found here:

See Min 26 - for VC math

" the people who have, especially if you're going to go for institutionally backed dollars, whether it's a seed fund or a larger venture firm, when we take money from professional investors we have to basically … To be a top quartile fund, we have to deliver a certain return. Top quartile returns for more recent ventures, vintages, or let's say for a Forex return. If someone has $100,000,000 fund, they have to figure out how to generate $400,000,000 to be able to raise money in the future. That $400,000,000 is going to be a combination. Let's say if 30 different companies two to four, which are going to wind up being great and the rest of what you're going to wind up not being so great. To balance out the averages, the two to four that have to be great have to be really great. They have to be worth a billion dollars or more, especially when you move to A. For a seed fund, if we are able to get the right owner … Our first one was $40 million. If we own 10% at exit of a $400,000,000 company, we could return our fund. That kind of aperture for an exit really stops at seed. Once you raise A, the people need the exits to be much bigger because those people all have $500,000,000, $800,000,000 funds. They need to own 10% of an $8,000,000,000 company to be able to return the fund. The data shows historically that most funds don't wind up having 50% of the companies, all the $400,000,000 exits. They have two to three B multibillion and a bunch of zeros or near zeros. They're looking at you thinking, “Is this one of the bullets I'm going to fire this year to be one of those companies that's going to be my outsized winner?” They're not thinking, “Can I get this to $200,000,000 or $300,000,000?” They're thinking, “Can this founder turn this into a multibillion dollar company?” The short-term execution and story has to be right, but for institutional folks, that's what's going on in their minds."