Transforming Portfolio Performance: The Benefits of OKRs and KPIs for VCs
The venture capital industry is constantly evolving and presents a dynamic landscape for firms looking to achieve their investment goals. To navigate this ever-changing environment, it is critical for VC firms to have a clear and structured approach to their operations and portfolio management. This is where OKRs (Objectives and Key Results) and KPIs (Key Performance Indicators) play a crucial role. These tools provide a framework for setting clear goals, tracking progress, and making data-driven decisions that drive portfolio performance and success. In this blog, we will explore the benefits of OKRs and KPIs for VC firms and how they can transform portfolio performance. Whether you are a seasoned VC professional or just starting, this guide will provide you with valuable insights into how to maximize the impact of your investment strategies.
Top 50 KPIs for VCs to drive confidence with stakeholders
Venture capital (VC) firms are accountable to a range of stakeholders, including limited partners (LPs), founders, portfolio companies, and their employees. Here are some key performance indicators (KPIs) that VCs may use to manage their stakeholders:
Fund Performance: Return on Investment (ROI), Internal Rate of Return (IRR), and Multiple on Invested Capital (MOIC)
Fund Size: Total Assets Under Management (AUM) and Capital Commitments
Fund Structure: Fund size, vintage, and duration
Portfolio Diversity: Industry, geographic, and stage diversity of portfolio companies
Portfolio Health: Survival rate, exit rate, and write-off rate of portfolio companies
Portfolio Value Creation: Gross and net portfolio value, net realized and unrealized gains, and net return
Reputation: Reputation with founders, portfolio companies, LPs, and the wider investment community
Deal Flow: Number of new investment opportunities, conversion rate, and investment pace
Employee Satisfaction: Employee turnover rate, employee engagement and feedback, and employee development
Compliance and Governance: Compliance with regulatory requirements and adherence to ethical standards
Social Impact: Impact on the environment, society, and communities where the portfolio companies operate.
Fund Liquidity: Liquidity position and management of LPs' capital commitments
LP Satisfaction: LP satisfaction, retention rate, and fundraising success
Fund Raising: Fundraising pace, conversion rate, and time to close
Portfolio Performance: Gross and net portfolio performance, time to exit, and exit value
Portfolio Company Valuations: Average and median portfolio company valuations, and distribution of valuations
Portfolio Company Growth: Revenue growth, user growth, and market share of portfolio companies
Portfolio Company Fundraising: Fundraising pace, conversion rate, and time to close of portfolio companies
Portfolio Company Operations: Gross margins, operating expenses, and profitability of portfolio companies
Portfolio Company Hiring: Hiring pace, employee turnover, and employee satisfaction of portfolio companies
Portfolio Company Market Penetration: Market penetration and growth of portfolio companies
Portfolio Company Customer Satisfaction: Customer satisfaction, NPS, and customer retention of portfolio companies
Portfolio Company User Engagement: User engagement, user retention, and user acquisition of portfolio companies
Portfolio Company Product-Market Fit: Product-market fit, customer acquisition cost, and LTV of portfolio companies
Portfolio Company Competitor Analysis: Competitor analysis and market share of portfolio companies
Fund Management Fees: Management fees and carried interest revenue
Fund Expenses: Fund expenses, including salaries, rent, and legal fees
Fund Allocation: Allocation of funds across sectors, geographies, and stages
Fund Investment Pace: Investment pace and deployment of capital
Fund Follow-On Investments: Follow-on investment pace and conversion rate
Fund Exit Strategies: Exit strategies, including M&A, IPOs, and secondary sales
Fund Reporting: Reporting frequency, quality, and accuracy of fund performance metrics
Fund Operations: Fund operations, including back-office functions and administrative support
Fund Compliance: Compliance with regulatory requirements, including tax, legal, and accounting requirements
Fund Ethics and Reputation: Ethical standards, including transparency, honesty, and fairness in fund operations
Fund Investor Relations: Investor relations, including communication, engagement, and feedback from LPs
Fund Capital Calls: Capital calls, including frequency, timing, and amount
Fund Distributions: Distributions, including frequency, timing, and amount of capital returned to LPs
Fund LPs: Number of LPs, LP satisfaction, and LP retention rate
Fund LPs Geography: Geographical diversity of LPs
Fund LPs Industry: Industry diversity of LPs
Fund LPs Investment Size: Investment size of LPs
Fund LPs Investment Horizon: Investment horizon of LPs
Fund LPs Investment Objectives: Investment objectives of LPs
Fund LP Communication: Communication with LPs, including frequency, quality, and transparency
Fund LP Reporting: Reporting to LPs, including frequency, quality, and accuracy of performance metrics.
Fund LP Requests: LP requests for information, meetings, and access to portfolio companies
Fund LP Feedback: Feedback from LPs, including satisfaction, engagement, and recommendations for improvement
Fund LP Engagement: LP engagement, including LP participation in events, meetings, and opportunities for feedback
Fund LP Portfolio Diversification: LP portfolio diversification, including investment in other funds and assets.
Example OKRs for VCs
Here are some sample OKRs for VCs that can be used to improve portfolio performance and growth, enhance portfolio diversity, and improve the investment process.
Objective: Improve Portfolio Performance in order to drive stakeholder value
Key Result 1: Increase the number of portfolio companies that reach their growth targets from 50% to 60% in 2023.
Key Result 2: Improve the average annual revenue growth rate of portfolio companies from 2.5x to 5x through partnerships
Key Result 3: Increase the number of successful exits from the portfolio from 6% to 8%
Objective: Enhance Portfolio Diversity in order to attract new opportunities
Key Result 1: Increase the number of portfolio companies in underrepresented industries from 10% to 20%
Key Result 2: Improve the average representation of women and minorities in senior leadership positions within portfolio companies from 5% to 15%.
Key Result 3: Increase the number of portfolio companies with a positive impact on society and the environment from 2% to 5%.
Objective: Improve the Investment Process in order to speed up investment decision making
Key Result 1: Improve the speed of due diligence and investment decision-making through automation from 25 days to 5 days
Key Result 2: Increase the number of investment opportunities evaluated from 15% to 25%.
Key Result 3: Improve the accuracy of investment forecasts from 55% to 65%
In conclusion, OKRs and KPIs are essential tools for VC firms looking to transform their portfolio performance. By setting clear goals, tracking progress, and making data-driven decisions, these tools help VC firms maximize the impact of their investment strategies and achieve their desired level of risk and return on investment. Whether you are a beginner or an experienced VC professional, incorporating OKRs and KPIs into your operations and portfolio management can help you achieve your investment goals and drive success for your firm and its stakeholders.
We hope this blog has provided valuable insights into how OKRs and KPIs can help transform portfolio performance, and we wish you the best of luck in your investment journey.
P.S. We can help you measure your OKRs and KPIs on Fitbots. Feel free to take a tour of our product. Fitbots is also a great product to help your portfolio companies manage OKRs & KPIs as well.
Managing KPIs and OKRs together with Fitbots
At Fitbots, we are focused on helping companies drive growth with OKRs, KPIs, and strategy execution. While helping you figure out what to measure, we strongly believe actions drive progress. Fitbots software is specially tuned to help you drive actions with both OKRs and KPIs no matter how you choose to run your business.
About The Author
Kashi is the Co-founder and CTO of Fitbots. Kashi has coached over 700+ teams on OKRs with a focus on helping founders and teams achieve more with OKRs. His niche focuses on the future of work by bringing technology to life.