The Differences Between a $50M and $1B VC Fund

As a VC fund grows from a $50 million fund to over $1 billion AUM, there are notable changes in check size, round size, and expected outcomes. Here are some examples of how these dynamics may shift:

Check Size:

  • $50 million fund: The typical check size for early-stage investments might range from $500,000 to $5 million. The fund focuses on smaller, early-stage companies and may lead or participate in seed or Series A funding rounds.
  • $1 billion AUM: With a larger fund, the check size can increase significantly. The fund may now consider check sizes of $10 million or more for early-stage investments. It has the capacity to participate in larger funding rounds and support subsequent funding needs of portfolio companies.

Round Size:

  • $50 million fund: The fund primarily invests in smaller funding rounds, such as seed rounds or Series A rounds, where the round size may range from $1 million to $10 million.
  • $1 billion AUM: With the ability to deploy larger amounts of capital, the fund can participate in larger funding rounds. It may now consider leading or participating in Series B, C, or later-stage funding rounds, where the round size could range from $10 million to hundreds of millions of dollars.

Expected Outcomes:

  • $50 million fund: The fund may primarily focus on early-stage investments, aiming for significant capital appreciation over the long term. The expected outcomes include achieving successful exits through acquisitions or initial public offerings (IPOs) that generate substantial returns for the fund’s investors.
  • $1 billion AUM: With a larger fund, the expectations for returns may evolve. The fund can pursue a more diversified strategy, including investments in later-stage companies with potentially lower risk profiles. While the focus remains on generating attractive returns, the fund may also target more mature companies with proven business models and revenue streams that can generate consistent cash flows and potentially deliver more immediate returns.

Examples:

Check Size Example:

  • $50 million fund: Invests $2 million in a seed-stage startup
  • $1 billion AUM: Invests $15 million in a Series B round

Round Size Example:

  • $50 million fund: Participates with a $5 million investment in a Series A round that raises $10 million in total.
  • $1 billion AUM: Leads a Series C round with a $50 million investment in a company that raises $100 million in total.

Fee Income:

  • $50 million fund: With a $50 million AUM, the 2% management fee would amount to $1 million in annual fee income.
  • $1 billion AUM: With a $1 billion AUM, the 2% management fee would amount to $20 million in annual fee income.

Expected Outcomes Example:

  • $50 million fund: Expects a 10x return on investment (ROI) over a 7–10 year holding period from an early-stage investment
  • $1 billion AUM: Aims for a combination of 5x ROI from later-stage investments and steady cash flow from growth-stage companies, targeting a shorter holding period of 3–5 years.

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Trace Cohen Angel Investor / Family Office/ VC

Angel in 60+ pre-seed/seed startups via New York Venture Partners (NYVP.com). Comms/PR/Strategy