Barry Bonds the Venture Capitalist

First let’s set the ground rules.

  1. At bats = # of investments
  2. Strikeout = 0x return
  3. Single/Double = 1x — 4x returns
  4. Triple = 5x — 10x returns
  5. Home run = >10x returns
  6. Let’s use (and forget PED’s) Barry Bonds 2001 Stats.
  7. Each At Bat = $50,000 investment
  8. Assume all investments happened day 1 and exited end of year 5.
  9. 2/20 fee structure

How were Barry’s VC returns in 2001?

476 at bats = $23,800,000 invested

93 strike outs. 93 X 50,000 = $4,650,000 in losses

91 singles/doubles, call this average 2x so 91 X 50,000 X 2 = $9,100,000 in returns

2 triples, call this 7.5x so 2 X 50,000 X 7.5 = $750,000 in returns

73 home runs, call this 20x return on average so 73 X 50,000 X 20 = $73,000,000 in returns

Gross profits = $78,200,000

Management fees over 5 years = 2% X $23,800,00 = $476,000 X 5 = $2,380,000

20% cut of gross profits = $15,640,00

Net profits = $78,200,000 — $2,380,000 — $15,640,000 = $60,180,000

Simple math

($60,180,000 — $23,800,000)/$23,800,000 = 153% over 5 years.

Yes I know you can argue this isn’t accurate, VC’s pay the management fees back, it’s not how they would measure returns, I didn’t count walks or stolen bases or other intangibles, etc. I think it’s a wash when you consider opportunity cost and all the VC’s tangibles for this to take place….it will even out. This was just an exercise I did out of curiosity. Let me know what you think.