Companion files

Venture Capital

A Practitioner’s Guide to Fund Economics, the Power Law, and the Return the Investor Actually Earns

Julian R. Sterling

These are the four Excel workbooks that go with the book. Every figure the book prints is reproduced in them by a live formula rather than a typed constant — change an exit multiple, untick a position, withhold a reserve, switch the carried interest convention, and every dependent number moves. Each one ends with a Checks sheet setting the printed figure beside the computed one: 65 controls in all, every one green. If a control ever reads FAIL, the workbook is wrong, not the book.

Free to download. No sign-up, no email address, nothing to fill in.

The four workbooks

• Chapters 1, 2, 13 and 15

  Kelvinside — the four multiples

  Four people quote the multiple of the same fund and give 3.6376x on the initial cheques, 2.6741x on the capital invested, 2.3265x on the commitment and 2.0612x in the bank account. All four are live here, from the twenty-eight positions as editable rows. The spread of 1.5764 turns is a formula, not an assertion.

  Underneath sits the engine the other three workbooks share: the fee schedule with its step-down, the investable capital of 128,530,000 and the 1.1670x a fund must return before the investor is whole, the carried interest, and the like-for-like ladder that puts the multiple and the internal rate of return on the same denominator. It also prints the limited partner's net gain two ways — they must agree at 157,210,000 — which is the check that catches the most common mistake in reading a fund report.

  The_Four_Multiples.xlsx · XLSX · 14 KB

• Chapters 4 to 8

  The power law, with a tick box

  The twenty-eight positions ranked by proceeds, each with its share and the running total, and a tick box on every line. Untick the first and the fund falls from 2.6741x to 1.3071x. Untick the first three and it falls to 0.7447x — twenty-five decisions out of twenty-eight, and the result is a loss.

  The sheet also settles the three arithmetics that get confused: the median position returns 0.1600x, the unweighted mean returns 1.0895x, and the fund returns 2.6741x. Both conventions for the median of an even sample are printed, because twenty-eight positions have no middle. Thirteen lines returned nothing and twenty-one returned less than they cost.

  The_Power_Law.xlsx · XLSX · 16 KB

• Chapters 9 to 12

  The reserve, measured separately

  The finding of the book, and the one thing in these files that no manager's report gives you. 52.1073 per cent of the fund went in as follow-on money, after the investment decision, priced at the next round. The initial cheques earned 3.6376x. The reserves earned 1.7886x. The published 2.6741x is the weighted average of two businesses.

  Every line carries its implied step-up — the initial multiple divided by the reserve multiple, 7.0000 on the best position — which is the mechanism, not the anomaly: a follow-on entering seven times higher returns seven times less. The sheet then runs the counterfactual: withhold the reserves from the six companies whose initial cheque was below cost and the fund returns 2.8400x, and says plainly that this is a rear-view mirror.

  The_Reserve.xlsx · XLSX · 16 KB

• Chapters 14 and 16

  Fees, carry and time

  The annual flows with the deployment schedule as an input, the J-curve and its trough of 129,856,666.67 at the end of year six — 86.5711 per cent of the commitment — and the single year that carries the fund: 232,400,000 of gross distributions land in year nine, 66.5951 per cent of everything.

  Then the carried interest computed three ways on identical cash flows: whole-of-fund against the commitment gives 39,795,000, whole-of-fund against called capital gives 39,401,000, and deal-by-deal gives 52,195,000. The spread of 12,400,000 is more than half the fund's entire management fee, and the term sheet says the same « 20 per cent » in all three cases.

  Fees_Carry_and_Time.xlsx · XLSX · 15 KB

Conventions used throughout

Blue text	a hardcoded input — you may edit these
Yellow fill	an input cell; everything else on the sheet is a formula
Black text	a formula — do not overtype these
Checks sheet	the printed figure beside the computed one, with a PASS or a FAIL

Why the checks matter more than the models

A workbook that agrees with a book proves nothing on its own — the author wrote both. What the Checks sheets do is different: they force the model to reproduce a number that was printed before the model existed, from a formula rather than from the number itself.

On this book the discipline worked in the other direction more than once, and the chapters carry the result rather than the original claim. A first draft asserted that the internal rate of return dampens what the multiple shows in full; put on the same denominator, the opposite is true, and the chapter now prints the ladder and the finding that does survive — carried interest costs the multiple 11.4034 per cent whenever it is taken, but costs the rate 6.8288 points if taken in year one and 2.2093 points if taken in year ten. Another draft carried an unweighted mean of 1.4045x that was a leftover from an earlier calibration; the correct figure is 1.0895x, and it was caught by refusing to print a number that would not divide.

Where a shortcut and the full computation disagree, both are shown. The fund called 151,970,000 on a commitment of 150,000,000, because early proceeds were recycled. The median of an even sample is printed under both conventions, 0.1600x and 0.1242x. Neither gap is smoothed away.

Opening the files

The workbooks open in Microsoft Excel, LibreOffice Calc, Google Sheets and Numbers. They use no macros and no add-ins, so nothing needs to be enabled or trusted. If your spreadsheet asks to update links on opening, decline — there are none.

Articles on this book

• Can a fund call more than the commitment I signed?151,970,000 called against a 150,000,000 commitment: the recycling clause, and the 1,970,000 nobody signed for.
• Pricing StrategyA list price of 148.00, a pocket price of 112.51, and the nine deductions in between — with what one point of price is actually worth.

Also by Julian R. Sterling

The other books with companion files. The full list of titles is on the author page.

• Breaking Into European Defence ProcurementThe money and the instruments, the 35 per cent content test, and proposal economics.
• Closing the DealTwo defensible bridges 20.70 million apart, a peg worth 7.00 million, and the six choices that remove 6.60 of a 12.00 earn-out.
• CMBS and CRE CLOsWhere the loss actually lands, from appraisal reduction to realised severity, and what the B-piece is really being paid for.
• How to Read a Commercial LeaseThe three refinements chapter 19 names and never performs, and the renewal rate below which the mark-to-market is worth nothing.
• How to Read a Credit AgreementWhere the default actually comes from, the cure that costs 5.5 times the other, and the capacity nobody adds up.
• How to Read a Limited Partnership AgreementWhat the clawback actually collateralises, and why every dollar won on the tax clause lands in the uncollateralised column.
• How to Read a Private Funds Financial StatementsThe Harbourgate reporting pack, five worked cases, and rebuilding your own account.
• How to Read a Real Estate Loan AgreementThe cure ratio in closed form, the four-point window in which the cheap cure works, and the cure sized to the wrong threshold.
• Insurance Capital for Asset ManagersWhy the same fund costs two insurers different amounts, and what opacity costs a manager in euros.
• Logistics and Industrial Real EstateNet effective rent, the ageing asset, and the development letting decision.
• Office Real EstateA six per cent yield that returns 3.2 per cent once the re-letting cycle is paid for, and the headline-to-net-effective rent arithmetic.
• Operational Due Diligence in Private EquityThe rating model built and then broken, and why refining a rubric weakens it.
• Personal Finance for BeginnersWhat a minimum payment really does, and what the snowball and the emergency fund actually cost.
• Private Equity Investor RelationsWhat a fund has returned, read six ways — and the eleven-point gap between them.
• Private Equity Real EstateBoth worked waterfalls to the dollar, the two capital stacks, and the arithmetic of the promote made changeable.
• Private Markets PerformanceThirty-one of the thirty-three figures chapter 19 publishes reproduce exactly — and the two that do not are named rather than quietly adopted.
• Raising a Real Estate FundThe chapter 17 funnel run on a calendar — when the first close actually lands, and why more travel does not help.
• Real Estate FinanceFour people look at one building and reach four numbers; the lender is whole only above 105,109,489, twelve per cent below today’s value rather than forty.
• Real Estate Financial ModelingProperty, development and fund models built line by line, and the modelling test worked end to end.
• Real Estate Fund ManagementThe waterfall of 6.11, the build-to-core of 8.7 and the proceeds gap, reproduced as live formulas rather than asserted.
• Real Estate Joint VenturesThe JV waterfall and promote, the complete venture, and failure to fund.
• Real Estate Transaction Due DiligenceWhat the diligence cost, which workstreams paid for themselves, and the investigation the book skips, priced.
• REIT Analysis and ValuationFFO of 532.0, AFFO of 381.0, net asset value and dividend safety — every figure a formula you can change.
• Retail Real EstateThe occupancy cost of every unit in a centre, the sixteen per cent of the rent roll no tenant can sustain, and the right-size-convert-or-hold decision priced.
• Sale and LeasebackA €179.5 million transaction end to end, with rent cover measured on the entity that actually signs the lease.
• Self-Storage Real EstateThe cohort engine behind a 590-unit store, and the rate increase on existing customers priced against the move-outs it causes.
• Senior Living and Healthcare Real EstateThe resident engine of a seventy-bed home, the payor mix, and a rota costed at the employer's real hourly rate.
• Significant Risk TransferThe bank's ceiling and the investor's floor derived independently, and the narrow band of prices at which both can say yes.
• Stock Market Investing for BeginnersWhat compounding and fees actually cost, with figures — and a calculator for your own.
• Student Housing Real EstateRevenue per available bed against the rate card, the letting campaign week by week, and the cost base of a 520-bed scheme.
• The AIFMD II HandbookThe reverse stress test computed, and the facility term that moves it more than any asset.
• The Asset-Based Finance HandbookThe borrowing base off a live loan tape, the Meridian transaction, and trigger design.
• The CBAM Compliance HandbookWhat 2027 really costs, how big the buffer should be, and the term the surrender formula counts twice.
• The Co-Investment PractitionerWhat dilution really costs, what a pay-to-play clause is worth, and how much to hold back.
• The Continuation Fund HandbookThe Thalia transaction, the bid funnel, and the fees behind the roll decision.
• The Data Center Development HandbookThe underwrite computed: the levered return the chapter never builds, and what a twelve-month slip costs.
• The Distressed Debt InvestorWhere the fulcrum security actually breaks, and what an 80-cent recovery is worth once composition and time are priced.
• The ESG Manager in Private EquityThe exit in equity and IRR, the line the book drops, and the half-turn nobody controls.
• The EU AML HandbookThe back book sized, and the month beyond which no headcount recovers a one-year window.
• The Evergreen Fund HandbookWhat the sleeve costs, and the headline IRR at which a closed-ended fund merely ties.
• The Family Office ProfessionalWhat an office costs, and the level of wealth at which building one starts to pay.
• The Fund Finance ProfessionalChapter 8 builds the reported-to-eligible NAV bridge; chapter 9 computes every ratio without it. Two points at every state — and what a subscription line does to the IRR.
• The Growth Equity InvestorWhat a pro rata cheque really costs, and the band where defending your ownership loses money.
• The Infrastructure Investment AnalystDebt sculpted to a coverage floor, and one asset valued twice to the last decimal.
• The Private Credit InvestorThe two coverage ratios are not measured on the same thing: the erosion is 47.7 per cent, not the 28.7 the headline implies.
• The Private Equity Fund Controller PlaybookThe book defines IRR, DPI, RVPI and TVPI, tells you to update them at the exit, and prints not one value. Computed: a 1.833× deal inside a fund at 0.892 TVPI.
• The Private Equity Operating PartnerThe value creation bridge built in full, and who actually made the return.
• The Private Fund Compliance OfficerThe grey zone as basis points, a broken deal four ways, and how many items you must test.
• The Private Markets Limited PartnerWhat a co-investment programme really saves, and the loss rate that erases it.
• The Private Markets Valuation SpecialistThe book describes its illustrations without numbers on purpose. These files close the chain, with every step visible.
• The Private Wealth FundraiserThree peaks, years apart, and the signature that tells a forecast miss apart.
• The Real Estate Asset ManagerBusiness plans, leasing, and what deferring the work on a building actually costs.
• The Real Estate Debt InvestorThe margin against the return on capital, the floor priced, and what prepayment protection buys.
• The Real Estate Development ManagerThe residual appraisal, the worked scheme, land diligence and the risk register.
• The Real Estate Secondaries InvestorAn eighteen per cent discount to net asset value that is really 9.18 once the reported value is unsmoothed.
• The Venture Capital AssociateWhat defending a position costs, and how many companies a reserve pool actually defends.
• Financial Risk ManagementA fund inside every limit that cannot meet a redemption — and the number that decides it is the one with no currency attached.
• Business ValuationThree advisers land 26.8 per cent apart on one company, and the whole gap turns out to be 1.96 points of perpetual growth.
• Quantitative FinanceThree models agree to a quarter of one per cent about a number that one unobservable input moves a hundred and three times as much.
• Asset ManagementFour people quote four returns for one mandate, all correct and 2.7017 points apart — forty-eight times the manager’s net skill.
• Alternative InvestmentsA manager reports 13.29 per cent and the endowment earns 6.26 — both correct, and only a third of the advertised advantage arrives.
• Credit AnalysisFour defensible EBITDAs on one borrower give leverage from 3.19x to 6.47x — and the add-back argument is fifty times the covenant headroom.
• Machine Learning for FinanceFive people quote the accuracy of one credit model, all five are right, and the number that decides how much money it makes is none of them.
• Commercial Real Estate InvestingThe equity earned 8.6647 per cent and the investor received exactly 8.0000 — the preferred return, and nothing above it.
• Mergers and AcquisitionsThe board paper says the deal creates 13,436,667 of value. The arithmetic says it destroys 17,530,855. Nobody is lying.
• DerivativesThe treasury report says the hedge cost 1,233,698. That is the interest differential, not a cost.
• Treasury ManagementFive cash balances for one company, all correct and 145,600,000 apart — and the revolver that is two-thirds of the liquidity leaves at a revenue fall of 8.4127 per cent.
• Financial Planning and AnalysisRevenue 3.0190 per cent above budget and operating profit 16.3209 per cent below it, in the same quarter, with every figure correctly stated.
• Energy TradingA position report that is 91.7031 per cent hedged and correctly computed, on a book that is short 2,542,000 MWh — and a margin call of 198,400,000 the next morning.
• The Private Equity Secondaries InvestorThe seller’s floor beside the buyer’s ceiling — and the zone that usually is not there.
• Construction Cost ControlA contract sum of 26,301,102 became a final account of 29,153,363 on the building that was drawn — and 85.8 per cent of what was lost was knowable on the day it was signed.