That's a pretty common issues in VC. I run a more traditional seed stage firm and we have to deal with similar issues. It's not uncommon for the IRR in the first few years to be artificially low given we have to hold investments at cost until they raise priced rounds. And when there's finally a wave of price marks your IRR will jump to a more accurate level it can usual maintain.
e.g. Our 2017 vintage fund was sitting around 45% IRR for years, and jumped to 93% almost instantly this year due to markups we could finally account for. We always knew the value was there, but couldn't reflect it in the numbers.
Likewise our 2019 vintage fund is currently showing 20% but we're fairly certain it'll jump to 40%+ in the not too distant future.
This dynamic makes it hard for emerging managers to show their performance relative to other fund managers with older vintages— even if you're excellent it'll be hard for LPs to recognize until 5+ years in, if that. It's just the nature of VC.
e.g. Our 2017 vintage fund was sitting around 45% IRR for years, and jumped to 93% almost instantly this year due to markups we could finally account for. We always knew the value was there, but couldn't reflect it in the numbers.
Likewise our 2019 vintage fund is currently showing 20% but we're fairly certain it'll jump to 40%+ in the not too distant future.
This dynamic makes it hard for emerging managers to show their performance relative to other fund managers with older vintages— even if you're excellent it'll be hard for LPs to recognize until 5+ years in, if that. It's just the nature of VC.