Copy of Venture Capital Investment

This diagram models the investment process for a venture capital fund with a given fund size (i.e. budget) and a set of assumptions about incoming investment prospects. These assumptions include the rate at which prospects are identified, the average rate at which prospects are approved versus rejected, and the average rate of returns at the point of divestment, among others.

Using the Monte Carlo method, the model identifies the reliability with which the fund gives positive returns. Since a positive return on investment is effectively an all-or-nothing event, simply observing the average returns is not sufficient to quantify the risk. After simulating, the results of this model will identify the frequency at which making a loss or a return will occur.