Returns of a Fund

Returns of a Fund

June 10, 2020 by investor

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

The Returns on a Fund are based on the power law which means that the Pareto Principle applies: The bulk of returns come from just a few of the companies.

Out of ten investments, one will be a home run, two to three will be small returns, and the rest will be losses. 

Some use the J-curve to show the returns. The returns in the early days are negative because the losses typically happen first. The winners come later. The shape of the returns curve looks like the letter J when plotted on a graph.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.