Why looking at financial metrics for early stage VC firms isn’t as revealing as you might expect

Sure, I’m being mildly facetious, but I’m mostly serious. I came from covering the public markets, where you’re swimming in numbers—revenue, Ebitda, you name it. But in the private markets, as a reporter, brass tacks numbers on how startups and the VC firms that back them are performing are a whole lot harder to come by. 

Thanks to the Freedom of Information Act, however, I can sometimes get a public records peek into how funds are performing. Recently, I got back a FOIA request from the Los Angeles County Employees Retirement Association (LACERA) and the set of numbers I found most interesting revolved around Primary Venture Partners, Storm Ventures, and Canaan Ventures—all early stage-focused firms.

So, we have some numbers. Cool, right? Not so fast. So, this is ITD IRR—inception-to-date internal rate of return. That means, in short, that these returns are specific to when LACERA invested. Taken a step further, there’s actually only one vintage here we can really assess, since there’s only one fund that’s been totally completed: Canaan VII.

That ITD IRR is 14.62%. Now, that number might look low if you’re expecting a 20% or 30% return, but taken in context for that 2005 vintage, Canaan VII is a high-performing fund, per IRR. According to PitchBook, the top decile for that specific vintage was 12.59%, and according to Cambridge Associates, the upper quartile for 2005 was 10.71%. 

Still there’s only so much we can assess here. As one investor reminded me: The “investment multiple” metric is squishier than it looks, since we don’t know if it’s TVPI (total value to paid-in) or DPI (distributed to paid-in capital). And there’s a pretty big difference: “DPI is actually cash returned, TVPI is just paper valuations,” the investor said.

From there, for every other fund on this table, it’s a wait-and-see game. Though some may think of IRR as a holy grail metric, it’s not really that simple. As one LP explained to me: IRR shouldn’t be used to compare funds that are less than ten years old, as it can provide misleading results. And for the really new funds that have barely called any capital, looking at their IRR right now is kind of like looking at the score in the first quarter of an NBA game—it takes time for investments to generate returns, and in most cases there’s still a lot of capital to call. Obvious, but bears repeating when looking at all this in context. I looked to PitchBook analyst Kyle Stanford, questioning the entire premise of this project: Are these numbers actually useful?

“It’s a really good way to describe the nuances of venture,” said Stanford. “You can talk about a 14% IRR in 2005, which was great, whereas maybe a 20% IRR in 2012 was mediocre…And when you talk about this, it speaks a lot to why LPs are looking for vintage diversification.”

There is, of course, some interesting stuff going on in this data. Take that Primary IV ITD IRR, of a whopping 91.26%. 

“Despite the tough environment, this has been the fastest we’ve seen one of our early stage funds take off,” Primary cofounder and general partner Brad Svrluga told Term Sheet via email.

Though that number will shift over time, that’s a killer start to the first quarter of a long game. But that’s just it, right? For essentially all of these vintages, the game is still very much in progress. 

So, ironically enough, the more numbers I’ve gotten, the more they reinforce for me just how long of a game venture really is. And the funny thing about it is: It strikes me that even if venture were more numerically transparent, it would still be tricky to quickly tell who’s winning the race—because the race itself is in slow motion.

See you tomorrow, 

Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
Submit a deal for the Term Sheet newsletter here.

Joe Abrams curated the deals section of today’s newsletter.

VENTURE DEALS

- Xaira Therapeutics, a San Francisco-based developer of AI technologies designed for drug discovery and development, raised $1 billion in funding. ARCH Venture Partners and Foresite Labs led the round and were joined by F-Prime, NEA, Sequoia Capital, Lux Capital, Lightspeed Venture Partners, Menlo Ventures, Two Sigma Ventures, and others.

- Tines, a Boston, Mass. and Dublin, Ireland-based platform workflow builder for technical teams, raised $50 million in a Series B extension. Accel and Felicis led the round and was joined by Addition, CrowdStrike Falcon Fund, and SVCI.

- Nagomi Security, a New York City-based proactive security platform for cybersecurity teams, raised $30 million in funding. TCV led the round and was joined by CrowdStrike Falcon Fund, Okta Ventures, and others. 

- Framework, the San Francisco-based developer of the Framework laptop, raised $17 million in Series A-1 funding. Spark Capital led the round and was joined by Buckley Ventures, Anzu Partners, Cooler Master, and Pathbreaker Ventures. 

- BforeAI, a New York City and Montpellier, France-based predictive security platform, raised $15 million in Series A funding. SYN Ventures led the round and was joined by Karma VC, Karista, Addendum Capital, and the Partnership Fund for New York City.

- Turnkey, a New York City-based developer of secure wallet infrastructure for crypto wallets, raised $15 million in Series A funding. Lightspeed Faction and Galaxy Ventures led the round and were joined by Sequoia, Coinbase Ventures, Alchemy, Figment Capital, and Mirana Ventures. 

- Outpost, an Austin, Texas-based network of managed semi-truck parking facilities, raised $12.5 million in Series A funding. GreenPoint Partners led the round and was joined by Speedwagon Capital Partners. 

- Summer Health, a New York City-based text-based pediatric care platform for families, raised $11.7 million in Series A funding. Alyssa Jaffee at 7wire Ventures and Deena Shakir of Lux Capital led the round and were joined by Sequoia Capital and Metrodora Ventures.

- Prophet Security, a Palo Alto, Calif.-based AI-powered security operations platform, raised $11 million in seed funding. Bain Capital Ventures led the round and was joined by others. 

- Octomind, a San Francisco and Karlsruhe, Germany-based AI-powered web testing platform, raised $4.8 million in funding. Cherry Ventures led the round and was joined by angel investors. 

- Amplifier Security, an Atlanta, Ga. and San Francisco-based AI-powered security pilot, raised $3.3 million in pre-seed funding. Cota Capital led the round and was joined by Westwave Capital, Shift Left Ventures, and angel investors.

- UserHub, a New York City-based billing platform designed for B2B SaaS businesses, raised $3.2 million in pre-seed funding. 468 Capital led the round and was joined by Mischief Capital, Tokyo Black, GTMfund, Lorimer Ventures, Nomad Cap, and Alumni Ventures. 

- Bump, a Los Angeles, Calif.-based wealthtech and financing platforms designed for creators, raised $3 million in seed funding from Impact X Capital, Capitalize VC, Serac Ventures, Tristan Walker’s Heirloom Ventures, Plug and Play, Symphonic Capital, Gaingels, and others.  

- Sorted, a London, U.K.-based recycling tech business, raised £1.7 million ($2.1 million) in seed funding. Pi Labs led the round and was joined by Archipelago Ventures, Circular Plastics Accelerator, Conduit Connect, Antler, and angel investors. 

- Keep Company, a Bethesda, M.D.-based employer-offered benefit designed to prevent burnout and attrition for working parents and caregivers, raised $1.4 million in funding from Techstars, Idea Fund Partners, VEST Her Ventures, 100KM, Pixel Perfect Ventures, and TEDCO.

PRIVATE EQUITY

- Celebrity Coaches, backed by Allied Industrial Partners, acquired Moonstruck Leasing, a Nashville, Tenn.-based entertainment coach leasing company. FInancial terms were not disclosed. 

- General Atlantic led a minority investment in LiveMode, a São Paulo, Brazil-based distribution solutions, content creation, and revenue generation partner for sports entities. They were joined by XP Private Equity. Financial terms were not disclosed. 

- MidOcean Energy, backed by EIG, acquired a 20% stake in Peru LNG, a San Isidro, Peru-based liquified natural gas company. Financial terms were not disclosed.  

EXITS

- Gamut Capital Management agreed to acquire DEX Imaging, a Tampa, Fla.-based provider of printers, copiers, and other office technology, from Staples, backed by Essling Capital, HarbourVest Partners, and Sycamore Partners Management. Financial terms were not disclosed.

- PAI Partners agreed to acquire a majority stake in Audiotonix, a Surrey, U.K.-based provider of professional audio mixing console and ancillary products market, from Ardian. Financial terms were not disclosed. 

- Thunes agreed to acquire Tilia, a San Francisco-based provider of payment solutions for online games, virtual worlds, creator economies, and in-app purchases, from Linden Lab, backed by Waterfield Group. Financial terms were not disclosed. 

OTHER

- JD Sports agreed to acquire Hibbett (NASDAQ: HIBB), a Birmingham, Alabama-based sports fashion retailer, for approximately $1.1 billion. 

- Descartes (NASDAQ: DSGX) acquired Aerospace Software Developments, a Dublin, Ireland-based provider of customs and regulatory compliance software for logistics companies and shippers, for $61 million. 

IPOS

- Viking Holdings, a Pembroke, Bermuda-based cruise line, plans to raise up to $1.1 billion in an offering of 44 million shares priced between $21 and $25 on the New York Stock Exchange. The company posted $4.7 billion in revenue for the year ending December 31, 2023. Viking Capital Limited, Canada Pension Plan Investment Board, and TPG.

FUNDS + FUNDS OF FUNDS

- Vestar Capital Partners, a New York City-based private equity firm, raised a $1.2 billion continuation fund vehicle for its stake in Circana, a Chicago, Ill.-based market research firm. 

PEOPLE

- Anzu Partners, a Washington, D.C.-based venture capital firm, promoted Patrick Harrington, Kyle McQuighan, and Wendy Papakostandini to principal.

- CoVenture Management, a New York City and Miami, Fla.-based alternative asset management firm, promoted Michael Breitstein to partner. 

- Diagram, a Montreal, Quebec-based venture capital firm, hired Vanessa Karras as a principal. Formerly, she was with McKinsey & Company.

- Lead Edge Capital, a New York City and Santa Barbara, Calif.-based growth equity firm, hired Aaron Darr as a principal. Formerly, he was with A&M Capital.

- Playground VC, a Palo Alto, Calif.-based venture capital firm, promoted Justin Ernest to principal and Rahul Meka to senior associate