Some LPs get bonuses or promotions tied to IRR, which creates pressure to push for faster exits. Others say IRR doesn't factor into their compensation at all. The difference shapes how much heat VCs actually feel from their investors.
And we have some LPs who get graded on IRR. And so if it takes us a long time to get them their money back, we are impacting their bonus, we are impacting their perception inside of their firm, and we are, generally speaking, not helping them get ahead in life. Sometimes there's nothing you can do about it. But I do think it's important as a fund manager to really understand. And we have other LPs who are just like, I don't get comped on IRR. It's like, not part of our comp formula. I mean, I care about it, but I thought other people were like, our bonus is tied to irr. And at the end of the year, if you don't do a good job on irr, I will make less money. I don't know if any of you know Chris Duvosis.
