The 27x Rule for Venture Fund Aggregate Investment Exits

Jason Lemkin has a great post up titled Why VCs Need Unicorns Just to Survive. The idea is that even with a standard-sized venture fund, say $100 million, the aggregate exit values of the investments needs to be $2.7 billion. Here’s how the math works, from his post:

• $100M fund
• Goal is $400M in returns before fees
• Average ownership stake of 15%
• Roughly 15 investments
• $400M / 15% = $2.7 billion

So, the 15 companies need to sell for an aggregate of $2.7 billion with the fund holding a weighted average equity position of 15% to generate $400M in returns. The 27x rule for venture fund aggregate investments means that whatever the venture fund size, multiple it by 27 to get the rough scale of all exits combined required for the fund to do well. If it’s a $50M fund, it needs $1.35 billion in aggregate exits. If it’s a $200M fund, it needs $5.3 billion in aggregate exits. The big wildcard is the average ownership stake, but the 27x rule is directionally correct

What else? What are some more thoughts on the 27x rule for venture fund aggregate investment exits?