
I run the world’s tiniest venture fund. And it’s beating almost everyone. 2.38x TVPI, 35.5% IRR.
I think of my angel investments as the world’s smallest fund. This morning, I dug into some numbers to see how I’m doing…
What Metrics Should We Look At?
My “Fund 1” contains 36 primary investments made from mid 2021 to mid-2025. I also wrote a couple follow-on checks, the last of which went out in July.
For a newer fund like mine, we’re looking for two numbers: Total Value to Paid-In (TVPI) and Internal Rate of Return (IRR).
TVPI is the portfolio’s total value on paper. This takes into account markups in later funding rounds.
IRR measures my annual return on capital. This accounts for how long it has taken each investment to reach its current value. Faster growth means higher IRR.
For older funds, Distributions to Paid-In (DPI) is a key metric. But for a newer fund, it’s not very meaningful.
In a five-year-old pre-seed and seed fund, your biggest winners usually have not exited yet.
How My Fund Stacks Up on the Numbers
For 2021 funds, top decile performance is 1.54x TVPI and 15.2% IRR, according to Carta. I’ve beaten that handily.
2021 was an unusually bad vintage. Valuations were high, and AI was about to change the industry forever.
Mine is one of the few funds that weathered the transition.
Doing the Numbers Like Sequoia
To arrive at these valuations, I only counted priced rounds as markups. This is in line with the best practices from top funds like Sequoia.
Some people count any raise at a higher valuation as a markup, even if it came on a SAFE.
Had I done that, my returns would be almost three times as high.
What’s Driving the Returns?
Like most venture funds, almost all my returns are coming from a couple companies: Micro1, Rilla and North.
I’m in awe of these founders. Without them, I would be nowhere.
I’ve piled additional investments into these companies whenever possible.
Slow Deployment Wins the Race
One of the biggest reasons my fund is outperforming almost everyone in the 2021 vintage: I took my time.
In 2021, many people were deploying a fund in 6-12 months. I took five years.
That’s at the very slow end for most funds. But I want to do the job right.
This is my own money. I’m not trying to hoover up as much cash as possible and charge a management fee on it.
I’m actually trying to get a return!
If you deployed your entire fund in 2021, you’re in pre-AI companies at sky-high valuations. Those investments probably aren’t looking too great today.
I have a few of those too! But I also have AI-native companies at better prices from 2022 and 2023’s down market.
Those investments are driving my returns now.
The Risks are Real
There are two big risks here: concentration and illiquidity
Almost all the gains are coming from three companies. Problems at one of those companies would hit my portfolio hard.
What’s more, we can’t eat markups. This portfolio is marked high, but this isn’t real money we can spend.
For a newer fund, that’s normal. It usually takes 10-15 years for a company to reach billions in valuation and IPO.
But there’s no guarantee these paper gains will ever hit my bank account.
What’s Next?
So what’s next for the world’s tiniest venture fund?
The 3 winners don’t need much help from me at this point. I just sit back and let the returns roll in.
I’ll be spending more time with the struggling companies. If I can help them even a little, it could change those numbers from a zero to a 1-3x.
Meanwhile, I’ve started investing out of “Fund 2”.
This fund will contain 40 companies. I’ve already got 7 names in it, and I’m itching to add more.
Wrap-Up
When I started angel investing, I committed to myself to invest for 10 years.
I’m a little over halfway through that 10 year commitment. And I’ll tell you, I’m having way more fun than when I started!
The obvious direction to take this is to raise money from outside LP’s and form a real venture fund.
I’m conflicted on whether I want to do that or not. It’s a lot of fun answering only to myself. Plus, all that time spent fundraising is time I’m not spending with founders.
On the other hand, more money means more impact.
Who knows what the future holds? All I know is I’m having a heck of a time! I’m grateful I get to do this every day.
If you want to be the next investment in my tiny little venture fund, shoot me a DM on X!
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