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In practice, this is not the major pain point I think you are calling it. The letters I read often have variants of "We've returned [0.8-2.5x] capital and still have [Uber] in the portfolio!"

What may be painful is not being able to at least return capital by the end of the fund without a WONDERFUL story about coming liquidity.

Current industry average 10 year IRR is 10% according to Cambridge Associates. You've really fucked things up badly if you can't return capital in year 9/10 on a 10% IRR.

To save others the trip to Wolfram Alpha:

Assuming money is put into the fund in year 0, a return of 2.35x capital in year 9 or 2.6x capital in year 10 is required to get a 10% IRR.

Distributing shares of a private company at fund liquidation is not unheard of either. In some cases (Box, Groupon, LendingClub) distributing early at private valuations allows to record a better IRR than subsequent public valuations.

Is that real return? (i.e. adjusted for inflation)

Or even better, is that comparative performance, i.e. 10% better than a vanguard index fund?

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