Silicon Valley’s Fantastic ‘Dry Bubble’

By Jason Lemkin

The other day, Bill Gurley, who has to be on the Top 5 most successful and smartest VCs, had a few semi-cryptic tweets. Cryptic to non-VCs, at least.

But it’s very interesting, and here’s the actual data from Cambridge Associates (Thank You!), the leading industry analysts of VC data — albeit only through the end of ’12 (though as we’ll see below, nothing’s really changed since then):


There is even more VC industry lingo in here, but once you understand it, it’s quite interesting.

The top line, or “TVPI”, are paper mark-ups + cash back out (distributed capital). “DPI” on the bottom is just the actual cash back out. You can see the delta is quite, quite large.

What’s a paper mark-up? Well, some late-stage private market investor invests in my company at a $1 billion valuation. If I invested at a $10 million valuation, I get a 100x paper mark-up. I’m a hero at the firm. I brag. I run a pre-victory lap and tell myself how brilliant I am. That I see the future.


In this scenario, as brilliant as I look with my 100x mark-up…I’ve actually returned nothing in cash. No cash. Not a nickel. It’s

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