VC RETURNS REVEALED: Recent Thrive & Notable Funds in a League of Their Own at UTIMCO
- 01AI is Producing the Most Concentrated VC Wealth Creation in History
- 02The Power Law Has Compressed: Vintage Timing Now Trumps Everything
- 03China Exposure Is a Significant LP Risk Factor
- 04Paper Gains Dominate Recent IRR
1. Key Themes
AI is Producing the Most Concentrated VC Wealth Creation in History
A small number of LLM companies — primarily OpenAI and Anthropic — are single-handedly driving extraordinary fund-level returns. Altimeter's Meghan Reynolds calculated that "VC investors' gross profit on 3 LLM companies currently equates to ~70% of all VC profits from the previous decade." This is power-law dynamics operating at a generational scale.
The Power Law Has Compressed: Vintage Timing Now Trumps Everything
Traditional VC has been described as a "get rich slow business," but AI up-rounds have shattered that norm. "While venture capital has traditionally been the get rich slow business, quick up rounds of high-flying AI startups have some recent vintages seeing remarkable markups early in the life of their funds." A 2022-vintage fund at Thrive already shows 126% IRR — a figure the article calls "the largest single-year IRR from a venture fund we've seen since we started covering these disclosures."
China Exposure Is a Significant LP Risk Factor
Funds with China-facing strategies are sharply underperforming their U.S. counterparts. "At HongShan, 2020, 2021, and 2022 IRRs are all negative or barely positive by 2025, reflecting the troubles of the Chinese startup sector." Post-Sequoia spinout geography matters enormously to LP outcomes.
Paper Gains Dominate Recent IRR — Realized Returns Are Still Unproven
The article flags a critical caveat: "IRR figures for recent funds mostly reflect valuation mark-ups on private companies, rather than realized gains, so any broad market downturn or bubble-bursting would bring those numbers down substantially." High headline IRRs mask underlying liquidity risk.
2. Contrarian Perspectives
Sequoia's "Struggling" Funds May Actually Be Recovering
Previous UTIMCO coverage generated negative chatter about Sequoia's performance, but fresh data tells a different story. "This fresh data shows that five to six years in, these funds could be turning the corner. Sequoia's 2021 Seed fund, for example, saw its IRR rise from just over 6% in last year's report to 11.3% this year." Investors who wrote off Sequoia's 2020–2021 vintage funds may have been premature.
Notable Capital's Dramatic Reversal Challenges the Narrative of Consistent Managers
Notable Capital's 2023 core fund swung from -48% to +96% IRR in a single year — the largest single-year swing in UTIMCO's disclosed portfolio. This suggests that fund-level IRR snapshots at early stages are nearly meaningless for manager evaluation, and that a single concentrated bet (Anthropic, in this case) can completely invert a fund's apparent quality. As the article notes: "its core 2023 fund IRR rose from -48% to 96% in just one year of reporting."
Older Notable Capital Vintages Lag — Brand ≠ Performance Consistency
Despite recent AI-driven windfalls, "Notable's older 2016 and 2018 funds lag behind some UTIMCO vintages we've pulled." This is a warning to LPs who allocate based on brand reputation: recent headline performance may not reflect a manager's long-term track record.
3. Companies Identified
| Company | Description | Why Mentioned | Quote |
|---|---|---|---|
| OpenAI | Leading AI foundation model company | Primary driver of Thrive Capital's 126% IRR in its 2022 fund | "Thrive Capital's Fund VIII...driven by early investments in OpenAI, Cursor, Ramp, and Base Power" |
| Anthropic | AI safety-focused foundation model company | Primary driver of Notable Capital's fund swing from -48% to +96% | "This fund includes stakes in Anthropic and Fal" |
| Cursor | AI-powered code editor | Portfolio company contributing to Thrive's 2022 fund performance | "driven by early investments in OpenAI, Cursor, Ramp, and Base Power" |
| Ramp | Corporate spend management platform | Portfolio company in Thrive's 2022 fund | "driven by early investments in OpenAI, Cursor, Ramp, and Base Power" |
| Base Power | Energy infrastructure startup | Portfolio company in Thrive's 2022 fund | "driven by early investments in OpenAI, Cursor, Ramp, and Base Power" |
| Fal | AI infrastructure/media generation platform | Portfolio company in Notable Capital's 2023 fund | "This fund includes stakes in Anthropic and Fal" |
4. People Identified
| Person | Description | Why Mentioned | Quote |
|---|---|---|---|
| Meghan Reynolds | Managing Director at Altimeter Capital | Provided the most striking quantification of AI's dominance in VC returns | "VC investors' gross profit on 3 LLM companies currently equates to ~70% of all VC profits from the previous decade" |
| Madeline Renbarger | Reporter/author at Newcomer | Author of the article | Bylined as the article's author |
5. Operating Insights
For Fund Managers: Concentrated Bets in Foundational AI Drive Disproportionate Outcomes — But Timing Is Everything
The funds generating elite IRRs made early, concentrated bets on OpenAI (2022 vintage) and Anthropic (2023 vintage). Funds that entered later — such as Thrive's 2024 venture fund — are "still showing slightly negative IRR." For managers, this reinforces that access and entry timing into foundation model companies is the single most differentiating variable in recent fund performance.
For LPs: Treat Early IRR as a Signal, Not a Result — Especially in AI-Driven Vintages
The article is explicit that high current IRRs are paper gains, not DPI. "Any broad market downturn or bubble-bursting would bring those numbers down substantially." LP due diligence should scrutinize what percentage of a fund's IRR is attributable to one or two unrealized private positions — and stress-test scenarios where those positions reprice.
6. Overlooked Insights
Peak XV's Internal Dysfunction May Be Compounding Geographic Headwinds
Beyond China's macro challenges, Peak XV — Sequoia's India/Southeast Asia spinout — is suffering from both internal drama and performance issues. The article notes "internal dramas we revealed here" alongside the fact that "subsequent vintages remain underwater." This dual risk (governance + market) makes Peak XV a distinct LP concern separate from HongShan's purely macro-driven struggles.
UTIMCO Data Lags by Several Months — Actual Markups May Be Higher
The data disclosed is through November 2025, and the article explicitly flags: "Some of the companies driving these funds' returns have been marked up even more since this data was compiled." For investors benchmarking against this data, the real-time picture — particularly for OpenAI and Anthropic — may show even more extreme concentration of gains than what the UTIMCO figures capture.