The VC Fund Model, Line by Line

This template models a venture fund end to end: capital in, checks out, outcomes back, and the LP/GP split of what returns. It is a teaching framework to adapt to your own strategy — dedicated tools like Tactyc will eventually replace it for live reserve planning, but building the model once by hand teaches you fund math nothing else will.

Tab 1 — Fund inputs

• Committed capital and GP commit.
• Management fees — rate, basis (committed vs invested capital), and the step-down after the investment period. Sum the fee line across the fund's life; first-time managers are routinely surprised that fees consume a meaningful share of the fund, which is exactly why recycling matters.
• Carried interest rate and whether there's a hurdle (most pure venture funds have none — model it anyway so you understand what LPs are asking for when they push).
• Fund term and investment period.

Tab 2 — Portfolio construction

The heart of the model:

• Number of initial checks, average check size, and entry stage.
• Target ownership at entry and an explicit dilution assumption per subsequent round survived.
• Reserve ratio, follow-on check sizes, and which portfolio tiers receive them.
• Deployment pacing — quarters over which initial checks go out.

Sanity check: initial capital plus reserves plus lifetime fees must equal committed capital plus recycled proceeds. If the sheet doesn't reconcile, the strategy doesn't either.

Tab 3 — Outcome distribution

Venture outcomes follow a power law, so a single average multiple is useless. Model buckets instead. A defensible seed-stage starting point: roughly half of companies return nothing or near it, a band returns capital or a small multiple, a handful graduate into meaningful outcomes, and one or two drive the fund. Assign each bucket a share of companies, an exit multiple on invested cost, and a time to exit.

Then stress it. The single most instructive exercise in the whole template: set the top bucket to zero and watch TVPI. That is what your fund looks like if you miss the outlier — and it is the honest case for ownership discipline and follow-on concentration in winners.

Tab 4 — Cash flows and the waterfall

• Capital calls against the deployment and fee schedule.
• Exit proceeds by year from the outcome buckets.
• Recycling — early proceeds reinvested during the investment period, capped at your LPA limit.
• The distribution waterfall: return of capital to LPs, then carry on profits. Model European (whole-fund) carry; deal-by-deal carry is rare in venture and LP-hostile.

Tab 5 — Outputs

The numbers LPs will actually ask about:

• Gross and net TVPI — total value to paid-in, the headline multiple, and the gap fees and carry create between gross and net.
• DPI — distributions to paid-in. The venture-specific lesson: TVPI ages, DPI pays. A fund can carry a flattering TVPI on paper markups for a decade; DPI is what re-ups are made of.
• Net IRR — sensitive to pacing and early distributions far more than intuition suggests.
• Loss ratio and the share of value from the top position — the two numbers that reveal whether your construction actually reflects power-law reality.

How to use it

1. Load your real construction plan from your LP deck.
2. Run the outcome buckets at pessimistic, base, and optimistic graduation rates.
3. Find the breakpoints: the minimum ownership, the maximum loss ratio, the required size of the winner at which the fund still returns a venture-worthy multiple.
4. Revisit annually with actuals. The delta between modeled and realized graduation rates is the most honest performance review a GP gets.

A fund model won't make you a better picker. It will stop you from building a portfolio where even great picking can't produce a great fund.