We build a basket of "top" VCs we'll use to represent "smart money"
Coming up with a list of the world’s best venture capital firms is not easy.
For one, the life of most funds is 10 years. And funds typically exhibit a J-curve where losing investments fail quickly, often in year two or three, whereas winners typically take seven to ten years to exit.
For the purposes of this newsletter, we’re looking for a basket of “top” VCs to represent “smart money” that we will use to evaluate investing trends in technology and the areas where value creation and change are likely to be greatest.
The typical metrics VCs are measured by include: distribution to paid in capital (DPI), total value to paid in capital (TVPI) and internal rate of return (IRR). Because these metrics vary by fund vintage, take a long time to be useful, are not published (though can be occasionally found in a pension fund limited partner’s annual report), and because we don’t need exact precision for our purposes, we will use the following mechanism to determine our “top” VC basket:
- Firms who invested early in the most billion dollar companies (“unicorns”)
- Firms who have consistently had the largest exits
- Firms with the most partners in CB Insights’ 2019 Top 100 venture capitalists analysis
- Firms with the highest peer review ratings
When we use the term “top VCs” in the newsletter, we are referring to the following basket of VC firms (in alphabetical order):
- Andreesen Horowitz
- Battery Ventures
- Felicis Ventures
- First Round Capital
- Foundation Capital
- Founders Fund
- General Catalyst
- GGV Capital
- Index Ventures
- Khosla Ventures
- Kleiner Perkins
- New Enterprise Associates (NEA)
- Norwest Ventures
- Sequoia Capital
- Spark Capital
- Trinity Ventures
- Union Square Ventures