As a SaaS exec turned VC, I frequently think about the corollaries of SaaS metrics to our firm mechanics - so I loved this!
That said, as you sort of alluded to in your point re: management fee balloon, an "efficient" revenue per employee metric in a VC firm can actually be a red herring. I loved this recent piece from Jamin Ball talked about misaligned incentives for VCs -- namely, distinguishing between 2% firms or a 20% firms. Ballooned "efficiency" metrics are often synonymous with 2% firms and misaligned incentives.
I might be fumbling my numbers, but I think the annualized revenue estimate for VC is off.
A 25% IRR implies that the fund’s ending value is roughly $3B × (1.25)^10 (about 9.3× the initial capital), and the VC's chunk of the profit would be much larger than $10.2M per year.
As a SaaS exec turned VC, I frequently think about the corollaries of SaaS metrics to our firm mechanics - so I loved this!
That said, as you sort of alluded to in your point re: management fee balloon, an "efficient" revenue per employee metric in a VC firm can actually be a red herring. I loved this recent piece from Jamin Ball talked about misaligned incentives for VCs -- namely, distinguishing between 2% firms or a 20% firms. Ballooned "efficiency" metrics are often synonymous with 2% firms and misaligned incentives.
https://cloudedjudgement.substack.com/p/clouded-judgement-102524-misaligned
Thanks for sharing!! It would be fantastic to know the Revenue per Employe by Stage (Seed, Series A, Series B...)
What about EBITDA per employee? Would that provide a more accurate perspective per industry?
Very interesting analysis.
I might be fumbling my numbers, but I think the annualized revenue estimate for VC is off.
A 25% IRR implies that the fund’s ending value is roughly $3B × (1.25)^10 (about 9.3× the initial capital), and the VC's chunk of the profit would be much larger than $10.2M per year.
Let me check!