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A VC analyses what makes a good return

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March 20, 2009 |

Fred Wilson offers an interesting analysis at his blog about what makes a good return for a VC.

He starts by saying: Lawrence Aragon at PE Hub used the news that Cisco paid $590mm (in stock) for Pure Digital the maker of the super popular Flip Cam to ask this question:

it sounds like a pretty good deal, but you have to understand that the VCs put $95 million into Pure, which makes the Flip digital video camera. Assuming they own half of the company, that’s a return of just over 3x their money. For a middle-of-the road VC firm, that would be a decent return, but for big name backers Benchmark Capital and Sequoia Captial that’s pretty much a dud.

Then he dissects what a VC is looking for. If you’re interested in the answer, I suggest you go check it out.

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