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8. A Tale of Two $100M Funds: Traditional vs. New Model – Projected 10-Year Outcomes

To concretize the differences between the classic venture model and the new multi-asset model, let’s compare two hypothetical VC funds – both with only $100 million in committed capital, a 10-year fund life, and the goal of maximizing or even stabilizing returns for their LPs. One will follow the traditional model (early-stage focus, equity-only, concentrated bets). The other will follow the new multi-asset, multi-stage, multi-region model (diversified investments across stages, assets, and geos). We’ll sketch their strategies and potential outcomes in terms of MOIC (Multiple on Invested Capital) and IRR (Internal Rate of Return) over 10 years, under reasonable scenarios.

Traditional $100M VC Fund (Classic Model) – This fund sticks to the old playbook of early-stage equity investing.

• Strategy & Portfolio: The fund makes ~25 investments of ~$4M each in seed or Series A rounds of startups (using the full $100M including reserves for follow-ons). It focuses on a specific region (say North America) and doesn’t invest in any public stocks or debt – pure venture equity. The portfolio is relatively unhedged and dependent on startup success.

• Expectations: The power law rules here. The fund assumes perhaps 15 of the 25 startups will fail or produce <1× returns, a few will return 1–3×, and ideally 1–3 companies will become big winners (10×+ returns each). Essentially, the hope is for 1-2 unicorns to carry the fund. If none emerge, the fund will likely underperform.

• Example Outcome Scenario: Let’s say out of 25 companies, 2 are hits: one exits at a 30× multiple on the fund’s investment, another at 10×. The rest include a couple of 2–3× middling exits and ~20 write-offs/low returns. If, for instance, the fund put $5M into the company that went 30×, that yields $150M. It put $5M into the one that went 10×, yielding $50M. Perhaps three others returned $2M on $2M each (1×, basically just capital back) and the rest zero. Total returned = roughly $200M on $100M invested. That’s a 2.0× gross MOIC. This would actually be a fairly mediocre outcome by top-tier standards (because only one big win). For a better scenario, assume one unicorn returned 50× on a $5M investment ($250M) and another 5× on a $5M ($25M), plus small contributions from others – then total = ~$300M on $100M, a 3.0× MOIC, which in VC is considered a very good result (tripling the fund). Many classic funds indeed target ~3× gross as a success.

• Projected IRR: IRR depends on timing of exits. In the classic model, usually the big wins come late (years 8-10). If we assume the $300M in the better scenario comes mostly at the end of year 10, the IRR is around ~12% (since 3× over 10 years ≈ 11.6% annual compounded). If there were some interim exits (say the 5× exit happened at year 5 returning $25M), that would boost IRR a bit. So a 3× outcome might translate to ~15% IRR net to LPs. A 2× outcome over 10 years is about ~7% IRR. And a home-run fund, say 5×, would be ~17-20% IRR. For context, top-quartile VC funds historically delivered mid-to-high teens IRRs. So our 3× (12-15% IRR) scenario is in line with a solid venture fund outcome. The key point is the volatility: this traditional fund could also plausibly return only 1× or less (if no unicorn hits), which would be <0% IRR. Or it could return 5× if multiple hits – it’s a wide range. It’s boom or bust, with fund success riding largely on those 1-2 companies.

• Risk Profile: High variance, skewed heavily by outliers. Many investments go to zero. The floor could be very low (worst-case, the fund loses a big chunk of capital if almost all bets fail). The ceiling is extremely high (in theory a fund could 10× if it found the next Google and put enough in). But on average, perhaps only 1 in 10 funds might exceed 3× returns; many might end around 1-2×. It’s a lottery-like payoff distribution, reflecting the power law.
  
  

Multi-Asset $100M VC Fund (New Model) – This fund employs a diversified, flexible mandate across stages and asset types, akin to what we described for the new RIA-driven approach.

• Strategy & Portfolio: The fund allocates its $100M across multiple buckets:

• Early-Stage Equity: ~$40–50M for classic venture bets (maybe 10-15 companies at $3-5M each). This is to capture upside of emerging startups (the traditional sweet spot).

• Growth/Secondary Investments: ~$20–30M to invest in later-stage rounds or buy secondary shares of high-growth companies. For example, it might invest $10M in a Series D of a “soonicorn” startup and use $10M to purchase shares from an early investor in another late-stage company. Target returns here are maybe 2–3× on these deals, but with lower risk than seed.

• Structured Debt/Yield: ~$10–15M in venture debt or other income-generating instruments. Perhaps the fund gives a $5M loan to a portfolio company with interest and warrants, and $5M into a high-yield venture credit fund or SPV. This might generate a steady, say, 1.5× return on that portion (e.g. 8-10% interest annually over several years, plus a bit of equity upside).

• Acquisitions/Company-Building: ~$10–15M reserved for active value creation plays. For instance, the fund might acquire a small profitable SaaS company for $10M and then try to grow it (the kind of deal a PE firm might do), or use $5M to incubate two new startups in-house (hiring founding teams and providing seed capital). The goal here is to potentially create proprietary upside – maybe one of the incubated projects becomes a hit, or the acquired company can be sold later for 3× the purchase price.

• Geographic spread: It might deploy, say, 70% in its home market and 30% in a couple of emerging markets via partnerships or co-investments, seeking the best deals globally.

  The above is just one possible allocation – the key is diversity. The fund is actively managed and can rebalance. If one of the early bets is clearly succeeding, it might allocate more capital there (through follow-ons or buying secondaries from other investors). If the IPO market opens, it might put some money into pre-IPO converts or PIPEs. The RIA structure gives it maximal flexibility.

• Expectations: The fund doesn’t rely solely on a unicorn, though it certainly tries to get one from its early bets. It also expects several moderate wins. The power law still applies to the early-stage portion, but the other portions aim for more consistent doubles. So the success scenario is more “multiple contributors” rather than one big home run.

• Example Outcome Scenario: Out of, say, 12 early-stage companies, one becomes a unicorn (10× return on a $5M investment = $50M), two others have decent exits (say 3× on $5M = $15M each, total $30M), the rest mostly fail or small exits (maybe $5M total back from the remaining $30M invested). So early-stage portion returns ~$85M on $50M invested (1.7× for that bucket). Now, the growth/secondary portion: suppose it invested in 4 later-stage companies with $5M each. Perhaps two of those go public and the fund exits with 2× ($10M each), one does better (3× = $15M), one flops or is written down to 0.5× ($2.5M). Total from that bucket = $10 + $10 + $15 + $2.5 = $37.5M on $20M (a strong 1.9× for that bucket). The debt/yield portion of ~$10M might have steadily accrued interest and warrant gains to become, say, $15M (1.5×) by year 10. The active acquisition/incubation bucket of $15M – maybe one incubated startup fails (loss of $5M), but the other succeeds modestly (fund invests $5M and it’s now worth $20M, a 4×), and the $5M acquisition is grown and sold for $10M (2×). That yields $30M returned on $15M.
  
  Adding up all buckets: Early ($85M) + Growth/secondary ($37.5M) + Debt ($15M) + Active plays ($30M) = $167.5M total returned on $100M. That’s a 1.67× MOIC. Not awe-inspiring, but importantly this is a fairly conservative/base-case scenario with only one unicorn and mostly small wins. The fund still makes money for LPs and likely beats public markets, though it might not be top-quartile among VCs with that multiple.
  
  Let’s consider a more upside scenario for the new model fund: suppose two early investments really take off (one 10×, one 5×), yielding $50M + $25M; a couple others 2× ($10M total), rest fail, so early bucket returns $85M (as before). In growth bucket, one of the late-stage bets turns into a unicorn as well and because the fund got in late it returns 3× ($15M on $5M), others average 2×, so that bucket returns perhaps $45M on $20M (2.25×). The debt still $15M (steady). The active bucket – maybe the incubated startup is a surprise hit (it becomes a unicorn too, 10× on $5M = $50M), the acquisition still 2× ($10M). That yields $60M on $15M. Now total = $85 + $45 + $15 + $60 = $205M on $100M = 2.05× MOIC. Now we’re above 2×. If one of those hits were even bigger (say the early unicorn was 20× instead of 10×, adding another $50M), it could push the fund to ~2.5×. So the upside isn’t capped – it can still get a >2× fund if multiple things go right. But it’s less likely to see a 5× fund, because by design it didn’t purely concentrate on one moonshot; it diversified some capital into moderate return assets.

• Projected IRR: Interestingly, the IRR for the new model could be quite healthy even if the MOIC is a bit lower, because of earlier cash flows. In our base-case scenario (~1.67×), we’d assume some of that $167M came back earlier – e.g. the debt portion might pay interest annually or by year 5, some secondaries might be sold by year 6, etc. If, say, $50M was returned by year 5 and the rest by year 10, the IRR might end up ~10-12%. In the upside 2× scenario, with staggered liquidity, IRR could reach mid-teens. The multi-asset fund likely starts returning capital earlier (perhaps by year 3-4 via secondaries or dividends), improving IRR. So while a traditional fund aiming for 3× might also end around 12-15% IRR (if late exits), the new model fund targeting ~2× could potentially match that IRR with faster return timing. From an LP perspective, this lower risk, faster liquidity profile can be very attractive – it’s more “private equity-like” in that sense (PE funds often target ~2× with steady distributions).

• Risk Profile: The new model fund has a higher floor and perhaps a somewhat lower ceiling. In a downside scenario where no unicorn emerges, the early bets might all fizzle (say only $20M back out of $50M), but the other assets could still produce maybe $40-50M (from debt interest, small exits, etc.), so worst-case it might return ~0.6-0.8× of capital – not good, but better than a traditional fund where if no winners, you might get <0.5×. More realistically, if nothing big hits, the fund could still perhaps break even or a bit above (1.1×–1.2×) due to yield and some salvage value. The traditional fund in that case would likely be <1×. Conversely, in a wildly good scenario, the traditional fund can massively outperform (imagine it invested in the company of the decade and got 100× – that fund could become 10× overall). The new model fund, even if it caught the company of the decade, might not concentrate enough in it to reach 10× fund – it might end up, say, 4× because a lot of capital was elsewhere. So it trades some upside for downside protection and consistency.
  

We can also compare some metrics over 10 years:

• Total Value to Paid In (TVPI or MOIC): Traditional target maybe 3× (top quartile), New model target maybe 2×.

• Distributed to Paid In (DPI) timeline: Traditional might be near 0 until year 8 then jump after big exits; New model might start distributing earlier (perhaps 0.3× by year 5, 1× by year 8, etc., reaching 1.5-2× by year 10).

• IRR: Traditional could be anywhere from negative to 20%+ depending on outlier timing; New model likely in, say, 10-18% range for most outcomes, with fewer extremes.

To make this concrete:

• Fund A (Traditional $100M) – after 10 years: returns $300M (3.0×). All of it comes from two IPOs in years 9 and 10. Net IRR ~13%. LPs are happy with the multiple, though they waited long (DPI was 0 until year 9).

• Fund B (Multi-Asset $100M) – after 10 years: returns $200M (2.0×). It already returned $50M by year 5 (via secondaries and interest), another $50M by year 8 (via a private sale), and $100M in years 9-10 (via one IPO and one acquisition). Net IRR ~15%. LPs got capital back throughout and the outcome, while a lower multiple, came with less volatility.
  
  

Which fund is “better” financially can depend on the LP’s preferences and the risk environment. In bull markets, the traditional model might hit 5× and look stellar. In tougher markets, the new model might reliably deliver 2× when many pure VC funds barely break even. This is why many large LPs (like pension funds) actually like the idea of VC firms evolving to be multi-strategy – it makes their returns more predictable.

From the founder perspective, Fund B might have been more helpful through the journey (providing debt, secondaries, etc.), whereas Fund A perhaps just provided money and cheerleading until exit. On the other hand, Fund A’s singular focus could mean they really pushed for huge outcomes (swinging for the fences), which can also be good if you’re the next Amazon.

In conclusion, this comparative scenario illustrates the trade-offs:

• The Classic $100M VC Fund is a high-beta, power-law-dependent vehicle. It could achieve very high multiples if it picks right, but also carries a substantial chance of low returns if luck doesn’t strike. It’s the traditional “go big or go home” approach.

• The New $100M Multi-Asset VC Fund is a more balanced, multi-pronged vehicle. It likely yields a solid multiple in most cases, albeit rarely the eye-popping outlier. Its IRR can be competitive due to earlier liquidity, and its risk-adjusted performance (returns per unit of risk) is arguably higher.
  

As the venture landscape shifts, we may see LPs allocating some of their capital to each style: part to “legacy” high-risk/high-return VC funds, and part to these new hybrid funds that promise more “private equity-like” consistency with venture-like upside. In fact, some large LPs have encouraged VCs to evolve this way, essentially saying: “We love venture growth, but we also like PE stability – if you can give us a blend, we’re on board.” Hence the success of recent mega-raises by firms like a16z and General Catalyst for their multi-strategy funds.

To tie it back to our narrative: the power law is no longer the sole ruler of venture returns – it’s now power law plus portfolio construction. The new model presents an alternative for how a VC fund can be structured and what its outcome distribution can look like. The numbers above, while hypothetical, underscore a core point: the multi-asset approach can deliver similar IRRs and competitive MOICs over a decade, with potentially lower downside, compared to the traditional model. It’s not magic – it won’t make a bad investor good – but for capable firms it can be a superior model for long-term success.

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