Can you return the fund?

• Ownership at exit = ownership at entry × (100% − dilution per round), once for each later round. With 15% at entry and three rounds of 20% dilution: 15% × 0.8 × 0.8 × 0.8 = 7.7%. If the VC follows on pro rata, ownership at exit stays at the entry figure.
• Exit needed to return the fund = fund size ÷ ownership at exit. A £50m fund owning 7.7% at exit needs a £651m exit for its share to equal £50m.
• Exit needed for 3x the fund = 3 × fund size ÷ ownership at exit.
• VC proceeds = your exit value × ownership at exit. Share of the fund returned = VC proceeds ÷ fund size.
• Capital invested = fund size × share actually invested. The target is still the full fund size, because the VC’s own investors expect their whole commitment back, fees included, before the fund is seen as working.
• Verdict: “Fund returner” if your exit is at least the exit needed to return the fund; “Meaningful, not fund-returning” if it is at least 25% of that figure; otherwise “Too small for this fund”.

Assumptions: no liquidation preferences, no deal fees or taxes on exit, no option pool top-ups beyond the dilution you enter, and a single exit price for all shares. Figures are rounded. In a real sale, preferences can give investors more than their ownership share in smaller exits, and follow-on money raises the VC’s total cost.

Rules of thumb (not rules): most VC investments return less than their cost, and a few big winners drive almost all returns (the power law). So many partners ask of every deal whether it could return the whole fund on its own. A good venture fund aims to return about 3x the fund to its investors over 10 years or so. Funds often keep around half their investable capital in reserve for follow-on rounds.