How LPs Use Net IRR Trailing Calculations in VC Due Diligence

In this episode, Lucas and Luna unpack why net IRR—the standard venture capital performance metric—can mislead limited partners when applied to early-stage funds. They walk through a real example: a $200 million seed fund that reports a 22% net IRR, but whose realized cash-on-cash returns tell a very different story. The hosts explain trailing vs. pooled IRR, the J-curve effect, and how savvy LPs are now requesting internal rate of return waterfall analyses that strip out unrealized markups. Lucas cites data from Cambridge Associates showing that the top-quartile venture fund from 2015–2020 generated a net IRR of 18%, but the same fund's distributed-to-paid-in capital ratio was just 0.4x after five years. The episode drills into one specific due diligence question: should an LP care more about a fund's trailing three-year IRR or its since-inception IRR? The answer, they argue, depends entirely on the fund's vintage year and the underlying exit environment. #NetIRR #VentureCapital #LPDueDiligence #IRRTrailing #CambridgeAssociates #JCurve #DistributedToPaidIn #VCBenchmarks #FundPerformance #LimitedPartners #SeedFund #CashOnCash #VintageYear #UnrealizedMarkups #WaterfallAnalysis #Finance #FexingoBusiness #BusinessPodcast Keep every episode free: buymeacoffee.com/fexingo