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Can Growth Metrics of Portfolio Companies Be Incorporated in Traditional VC Fund Performance…
- Tambi Jalouqa, Managing Partner at Propeller, proposed a new portfolio metric called TARRPI to capture the performance of companies within a VC portfolio, particularly in sectors like SaaS
- TARRPI method does not account for how high ARR growth translates into actual cash returns for LPs.
- Innovation in proposed methodology is particularly valuable in regards to focused growth models fueled by ARR.
- Inspired by TARRPI, a variation, labeled Growth Adjusted TVPI (GA-TVPI), integrates traditional elements with growth metrics to produce a comprehensive view of fund performance.
- GA-TVPI adjusts the unrealized portion of TVPI to reflect growth rates of key performance indicators (KPIs) to get a clearer picture of the remaining portfolio.
- GA-TVPI can serve as a complementary metric that offers additional insights into a portfolio’s growth potential.
- GA-TVPI does offer additional insights into the risks and effects of future growth, but like TARRPI does not necessarily capture what ultimately matters to LPs.
- VC’s use a variety of metrics to build a comprehensive view, including Traditional Metrics, Supplementary Metrics, Operational Metrics at the Company Level, and Scenario Analysis and Sensitivity Testing.
- By keeping the conversation open and collaboratively refining these ideas, we can continue to evolve how we evaluate VC fund performance.
- TARRPI and GA-TVPI methodology are valuable components of a comprehensive metric evaluation framework that can provide investors with valuable insights.
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