It is fascinating for me to watch the ever larger venture capital funds being raised. I started representing venture capital funds and their portfolio companies starting in 1985. Back then a large fund was $10 million! The real question for me is how do all of these large funds achieve venture-type returns - generally 2-3 times the initial investment amount in the fund. Simple math and a look at the typical exit size for portfolio companies says that all but the most successful funds are likely to struggle in achieving those type of returns on larger venture funds.

Limited partners investing in venture capital funds continue to favor the largest and most successful funds. While funds like Andreessen Horowitz have a successful track record to date, I can’t help but wonder if the higher returns going forward may come from smaller to mid-size funds in the $100 million-$500 million range.

Andreessen Horowitz (a16z) has closed a pair of funds totaling $4.5 billion, the firm confirmed in a blog post this morning. The firm has raised $1.3 billion for an early-stage fund focused on consumer, enterprise and fintech; and closed a $3.2 billion growth-stage fund for later-stage investments.