Metrics & Performance
Kill Rate
Last updated
Quick Answer
The percentage of startups in a portfolio that fail or return less than invested capital.
What it is
Kill rate refers to the percentage of startup ideas, projects, or portfolio investments that a team, fund, or organization terminates or stops pursuing — reflecting the discipline to cut losers quickly and reallocate resources to higher-potential opportunities. In the context of a venture portfolio, a fund with a healthy kill rate identifies underperformers early and stops investing follow-on capital rather than doubling down out of sunk cost reasoning. For founders, a high internal kill rate for product features and experiments signals a team that prioritizes learning and resource efficiency over attachment to initial ideas. The inverse — a low kill rate — often indicates emotional attachment, sunk cost bias, or lack of analytical rigor.
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.
Operational context
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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.
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Frequently Asked Questions
What is Kill Rate in venture capital?
Kill rate refers to the percentage of startup ideas, projects, or portfolio investments that a team, fund, or organization terminates or stops pursuing — reflecting the discipline to cut losers quickly and reallocate resources to higher-potential opportunities.
Why is Kill Rate important for startups?
Understanding Kill Rate is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
What category does Kill Rate fall under in VC?
Kill Rate falls under the metrics category in venture capital. This area covers concepts related to the quantitative measures used to evaluate fund and company performance.
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