Scale compresses returns. Not in theory. In practice.
I built an interactive dashboard analyzing venture capital performance across several of the most well-known firms in the industry — Thrive Capital, Andreessen Horowitz, Founders Fund, Lightspeed, Insight Partners, Khosla Ventures, and Tiger Global — across 49 individual funds.
The dataset spans multiple vintages and captures both early-stage and growth vehicles. When you look at it collectively, a clear pattern begins to emerge.
The Firms Analyzed
The key performance metrics LPs actually care about: Net TVPI, DPI, and IRR — tracked across 49 funds spanning multiple vintages.
The Structural Tension in Venture Capital
Venture capital has always been a power-law business. A handful of companies generate the majority of returns. That reality works beautifully when funds are smaller.
$200M fund
A few breakout companies → extraordinary multiples
$1B fund
Needs larger exits or more winners to match smaller fund multiples
$5B fund
Requires vastly larger outcomes — or more ownership at each
This is not a criticism of large funds. It is simply the arithmetic of venture capital.
What the Data Shows
Early funds often produce the highest multiples
Many firms generate their strongest TVPI and IRR in earlier vintages when fund sizes were smaller and ownership levels were higher.
Larger funds tend to show lower TVPI
As capital scales, gross outcomes may remain strong, but multiples compress. A $10B outcome can still be a spectacular company. But if the fund is large enough, even great exits become diluted in their impact.
DPI takes longer in larger vehicles
Larger portfolios, later-stage investments, and longer holding periods delay distributions. LPs waiting for realized cash may find that DPI builds more slowly as funds scale.
The LP Question
Large Platforms
- → Brand, scale, and deal flow
- → Consistency and access to iconic companies
- → Larger portfolios with more diversification
Smaller Funds
- → Greater chance of higher multiples
- → Concentrated ownership in fewer bets
- → More flexibility in exits and timing
Most LP portfolios include both. The portfolio construction challenge is deciding how to balance the two — and the data can help inform that decision.
The venture capital industry has quietly evolved into asset management at scale.
Understanding how scale affects returns is becoming increasingly important.
Explore the full interactive dashboard with 49 funds on the VC Fund Performance Dashboard at Value Add VC. Originally published in the Trace Cohen newsletter.