Metrics & Performance
Kill Rate
The percentage of startups in a portfolio that fail or return less than invested capital.
Kill rate refers to the percentage of portfolio companies in a venture fund that fail outright or return less than the invested capital. It is a fundamental metric of venture portfolio performance, reflecting the inherent high-risk nature of early-stage investing where a significant portion of investments are expected to produce zero or near-zero returns.
Typical kill rates in early-stage venture portfolios range from 40-60%, meaning roughly half of all investments will fail to return capital. This statistic underscores why venture capital follows a power-law distribution: fund returns are driven not by avoiding losses but by finding the rare outliers that generate 10x, 50x, or 100x returns. A fund can have a 50% kill rate and still deliver exceptional returns if its winners are large enough.
Kill rates vary significantly by fund stage and strategy. Seed-stage funds typically have higher kill rates (50-70%) because they invest earliest when uncertainty is greatest. Growth-stage funds have lower kill rates (20-40%) because they invest in companies with proven revenue and product-market fit. The kill rate also reflects a fund's investment discipline, portfolio management approach, and the degree to which it provides active support to struggling portfolio companies.
In Practice
Redwood Seed Fund invests in 30 companies from its $50M Fund II. After seven years, the portfolio shakes out as follows: 15 companies (50%) have either shut down or returned pennies on the dollar — total losses of roughly $20M. Ten companies (33%) returned between 1-3x their invested capital, generating modest returns. Four companies (13%) returned 5-10x, producing solid gains. And one company (3%) — a developer tools startup that became a market leader — returned 45x, generating $75M on a $1.7M investment. Despite the 50% kill rate, the fund returns 3.2x gross to its LPs, with the single top performer accounting for more than half the total gains.
Why It Matters
Understanding kill rate is essential for anyone involved in venture capital because it frames the entire investment strategy. Founders need to understand that their investors expect many portfolio companies to fail, which shapes how VCs think about risk, support, and follow-on decisions. A VC's willingness to write off a struggling investment isn't callousness — it's rational portfolio management in an asset class where losses are built into the model.
For LPs and fund managers, kill rate analysis provides insight into whether a fund's portfolio construction and investment process are working. A kill rate that's significantly higher than peers might indicate poor selection; a rate that's significantly lower might suggest the fund isn't taking enough risk. The interaction between kill rate and winner magnitude is what determines overall fund performance, and the best fund managers are explicit about this trade-off in their strategy.
VC Beast Take
Kill rate is the metric that keeps venture capital honest about what this business actually is: a portfolio game where most bets lose. The industry's marketing focuses on the winners — the breakout successes, the unicorns, the IPOs — but the day-to-day reality of venture capital involves spending far more time managing struggling and failing companies than celebrating victories.
The most intellectually honest VCs are transparent about their kill rates and what they learn from failures. The least honest ones quietly write off dead companies and never mention them in LP meetings. For founders, the implication is sobering but important: your VC is managing a portfolio, and your company is one of many bets. If your startup is struggling, the fund's economic incentive is to triage quickly and redirect attention to the winners. This isn't personal — it's the mathematics of power-law investing. Understanding this dynamic helps founders set realistic expectations about the support they'll receive during difficult periods.
Related Concepts
Further Reading
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The Venture Studio Model: How Startup Factories Build Companies
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