A Practitioner’s Guide to Fund Economics, the Power Law, and the Return the Investor Actually Earns
Julian R. Sterling
These are the companion files of Venture Capital by Julian R. Sterling.The book on Amazon →
The four Excel workbooks that go with the book, now in English and corrected where they were wrong. Every
figure the book prints is reproduced by a live formula — change an exit multiple, untick a position, withhold
a reserve, switch the carried interest convention, and every dependent number moves — and each workbook ends
with a Checks sheet: 312 controls, held to the precision the book prints. Around them: the same
models with the inputs emptied, thirteen working documents to print, forty questions that mark themselves, and three
cases the book names and never takes to a number.
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Twelve workbooks, the printable documents and the read-me. Each group below can also be
downloaded on its own. Last revised 24 September 2026.
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These carry the book’s own fund, Kelvinside Ventures Fund III, so that every number it prints can be traced to a
live formula. The four share one Inputs sheet.
Download these four120 KB
Chapters 1, 2, 13 and 15
Kelvinside — the four multiples
Four people quote the multiple of the same fund and give 3.6376x on the
initial cheques, 2.6741x on the capital invested, 2.3265x on
the commitment and 2.0612x in the bank account. All four are live here, from
the twenty-eight positions as editable rows. The spread of 1.5764 turns is a
formula, not an assertion.
Underneath sits the engine the other three workbooks share: the fee schedule with its
step-down, the investable capital of 128,530,000 and the 1.1670x a fund must
return before the investor is whole, the carried interest, and the like-for-like ladder that
puts the multiple and the internal rate of return on the same denominator. It also prints the
limited partner's net gain two ways — they must agree at
157,210,000 — which is the check that catches the most common mistake in
reading a fund report.
Revised: the ladder now carries the three rates from the annual flows — 21.7217, 18.3357 and
15.7734 per cent — and what each step costs. The committee’s shortcut is 2.2914x, not 2.2913x, so the
recycling gap is 0.0351 of a turn by both routes: the book’s “disagreement in the fourth decimal”
was rounding.
The twenty-eight positions ranked by proceeds, each with its share and the running total, and
a tick box on every line. Untick the first and the fund falls from 2.6741x to
1.3071x. Untick the first three and it falls to 0.7447x
— twenty-five decisions out of twenty-eight, and the result is a loss.
The sheet also settles the three arithmetics that get confused: the median position returns
0.1600x, the unweighted mean returns 1.0895x, and the fund returns 2.6741x.
Both conventions for the median of an even sample are printed, because twenty-eight positions
have no middle. Thirteen lines returned nothing and twenty-one returned less than they cost.
Revised: the sheet now ranks the lines itself and finishes Chapter 5 to the bank statement. Without
Aldwyn the limited partner receives 150,780,000: 1.0052x the commitment, 0.9922x the
capital called. The book printed 0.8621x, deducting the fee from proceeds when it already sits inside the
calls — the error its own Table 7 warns against. About level, not eighty-seven pence.
The finding of the book, and the one thing in these files that no manager's report gives you.
52.1073 per cent of the fund went in as follow-on money, after the investment
decision, priced at the next round. The initial cheques earned 3.6376x. The
reserves earned 1.7886x. The published 2.6741x is the weighted average of two
businesses.
Every line carries its implied step-up — the initial multiple divided by the reserve
multiple, 7.0000 on the best position — which is the mechanism, not the anomaly: a
follow-on entering seven times higher returns seven times less. The sheet then runs the
counterfactual: withhold the reserves from the six companies whose initial cheque was below
cost and the fund returns 2.8400x, and says plainly that this is a rear-view
mirror.
New: the two funds of Chapter 11 with their own fees and carried interest — seed at 2.6990x net,
growth at 1.4287x — and the 9,278,102 the investor keeps if the growth half pays half the fee
and half the carry.
The annual flows with the deployment schedule as an input, the J-curve and its trough of
129,856,666.67 at the end of year six — 86.5711 per cent of the
commitment — and the single year that carries the fund:
232,400,000 of gross distributions land in year nine, 66.5951 per cent of
everything.
Then the carried interest computed five ways on identical cash flows: whole-of-fund against
the commitment gives 39,795,000, whole-of-fund against called capital gives
39,401,000, and deal-by-deal gives 52,195,000. The spread of 12,400,000 is
more than half the fund's entire management fee, and the term sheet says the same
« 20 per cent » in all of them. With an eight per cent hurdle and no catch-up it falls to about
25,349,000; with a full catch-up, to 39,401,000: the clause that matters is the catch-up.
Revised: the three rates, the carried interest by year and the same carried collected in year one
(11.5069 per cent net) or year ten (16.1264). At the trough, the end of year six,
98.7392 per cent of the proceeds are still to come; the book prints 90.9664, the figure a year later.
The four workbooks with every input emptied. The checks sheets count what is still missing and test what holds for any inputs.
Chapters 1 to 16
Your fund, your lines, your schedule
The same four workbooks, same formulas, with the fund terms, the lines of the portfolio (up to twenty-eight) and the investment schedule emptied. The tick boxes, the eight per cent hurdle and the outcomes tested stay. Everything stays blank until the inputs are complete.
The book’s inputs are listed in a text file inside the archive. Type them back in and the book’s figures come back with them: 3.6376x, 2.6741x, 2.3265x, 2.0612x, and every check passes.
Thirteen pages to print and use. A4, with margins wide enough for US Letter.
Chapters 1 to 18
Thirteen working documents
The four denominators, fixed before anything is read. The fee schedule reduced to two numbers, with the step-down priced. The recycling clause: cap, window, gains, threshold. The realised table, requested. Concentration, measured. The follow-on memo in five clauses, read backwards. The committee agenda weighted by money. The track record split into its two funds. What the manager takes at four outcomes. The carried interest clause in three questions. Four numbers on stated denominators. The J-curve written down in advance. And re-underwriting a fund in eight steps, with the seven tables of the report that would survive.
A workbook that marks itself. Answer in the yellow cells; the marking fills in as you go.
All parts of the book
Forty questions on the book
Eight on the multiples, the fees and recycling, nine on the power law, seven on the reserve, seven on the manager’s take and the carried interest, five on rates, time and the report, and four on the three cases below. Where the book is revised, the answer is the corrected figure and says why. Numbers are marked to a tolerance, multiple choice to the letter, and the score sheet counts your errors part by part.
New material, not a restatement. Three situations the chapters name and never take to a number. Each case is one workbook: the note is the first sheet, the model is the rest, and a checks sheet closes it.
Chapter 3 · Case one
What the recycled capital had to earn
Recycling helps the limited partner only if the redeployed money beats what it would have done with the distribution. Held three years, at an 8 per cent alternative (ADDED), the 1,970,000 must return 1.6558x, of which a quarter of a turn is the commitment threshold of the carried interest. In follow-ons at the reserve half’s 1.7886x it just clears; at 0.8862x, the reserve half without Aldwyn, it costs 1,212,952.
Chapter 18 · Case two
Two quarters on a credit line
The book says a line that postpones calls by two quarters raises the rate and changes nothing real. On Kelvinside, at 6 per cent (ADDED), it lifts the net IRR from 15.7734 to 16.8850 per cent and costs the limited partner 4,551,300; a year of line adds 2.53 points. A higher rate, less money.
Chapter 16 · Case three
Five vintages, one programme
Kelvinside committed to again every year for five years (ADDED). The programme needs 523,671,667 at its worst, at the end of year 7: 69.82 per cent of the commitments against 86.57 for one fund. It pays for itself only from year 10, and its harvest is still a run of year nines.
an input cell; everything else on the sheet is a formula
Black text
a formula — do not overtype these
Checks sheet
the printed figure beside the computed one, to the precision printed, with a PASS or a FAIL; the file ends ALL OK
ADDED
a figure the book does not give, used in the cases and marked wherever it appears
Why the checks matter more than the models
A workbook that agrees with a book proves nothing on its own — the author wrote both. What
the Checks sheets do is different: they force the model to reproduce a number that was printed
before the model existed, from a formula rather than from the number itself.
On this book the discipline worked in the other direction more than once, and the chapters carry
the result rather than the original claim. A first draft asserted that the internal rate of return
dampens what the multiple shows in full; put on the same denominator, the opposite is true, and
the chapter now prints the ladder and the finding that does survive — carried interest costs
the multiple 11.4034 per cent whenever it is taken, but costs the rate 6.8288
points if taken in year one and 2.2092 points if taken in year ten. Another draft carried an
unweighted mean of 1.4045x that was a leftover from an earlier calibration; the correct figure is
1.0895x, and it was caught by refusing to print a number that would not divide.
Holding every check to the printed precision did it again. The fund without Aldwyn had been
finished with the fee counted twice; the share of proceeds still to come at the trough was the
figure for the following year; three counts were off; and a dozen fourth decimals had been computed
from rounded inputs. Each correction is listed on the line of the check that found it.
Where a shortcut and the full computation disagree, both are shown. The fund called 151,970,000 on
a commitment of 150,000,000, because early proceeds were recycled. The median of an even sample is
printed under both conventions, 0.1600x and 0.1242x. Neither gap is smoothed away.
Go beyond the companion files
Venture Capital develops the complete framework behind these models, with the assumptions, trade-offs and worked examples tied together.
The workbooks open in Microsoft Excel, LibreOffice Calc, Google Sheets and Numbers; the PDF
prints on A4 or US Letter. They use no macros and no add-ins, so nothing needs to be enabled or trusted. If your spreadsheet asks
to update links on opening, decline — there are none.
What changed, and when
24 Sep 2026
The four workbooks rebuilt in English, with 312 checks held to the printed precision, the three rates, the carried interest by year and under five conventions. Chapter 5 corrected: without Aldwyn the limited partner receives 1.0052x the commitment, not 0.8621x (the fee had been counted twice). At the trough 98.7392 per cent of the proceeds are still to come, not 90.9664; three counts and a dozen fourth decimals corrected. Added: a blank set, thirteen working documents, forty questions that mark themselves, and three cases.
How many companies should a VC fund invest in?From 10 to 40 companies the odds of at least 1x gross rise from 62.8 to 86.2 per cent; the odds of 3x peak near 20, at 30.9 per cent, and fall to 13.5 at 100.
How much does a VC firm make from a $100m fund?On a $100m fund, $17.5m of fees leave $3.5m of profit after costs; at 3x gross the carry adds $29.5m. At $500m, fee profit is a quarter of the take.
Closing the DealTwo defensible bridges 20.70 million apart, a peg worth 7.00 million, and the six choices that remove 6.60 of a 12.00 earn-out.
CMBS and CRE CLOsWhere the loss actually lands, from appraisal reduction to realised severity, and what the B-piece is really being paid for.
How to Read a Commercial LeaseThe three refinements chapter 19 names and never performs, and the renewal rate below which the mark-to-market is worth nothing.
How to Read a Credit AgreementWhere the default actually comes from, the cure that costs 5.5 times the other, and the capacity nobody adds up.
How to Read a Real Estate Loan AgreementThe cure ratio in closed form, the four-point window in which the cheap cure works, and the cure sized to the wrong threshold.
Office Real EstateA six per cent yield that returns 3.2 per cent once the re-letting cycle is paid for, and the headline-to-net-effective rent arithmetic.
Private Equity Real EstateBoth worked waterfalls to the dollar, the two capital stacks, and the arithmetic of the promote made changeable.
Private Markets PerformanceThirty-one of the thirty-three figures chapter 19 publishes reproduce exactly — and the two that do not are named rather than quietly adopted.
Raising a Real Estate FundThe chapter 17 funnel run on a calendar — when the first close actually lands, and why more travel does not help.
Real Estate FinanceFour people look at one building and reach four numbers; the lender is whole only above 105,109,489, twelve per cent below today’s value rather than forty.
Real Estate Financial ModelingProperty, development and fund models built line by line, and the modelling test worked end to end.
Real Estate Fund ManagementThe waterfall of 6.11, the build-to-core of 8.7 and the proceeds gap, reproduced as live formulas rather than asserted.
REIT Analysis and ValuationFFO of 532.0, AFFO of 381.0, net asset value and dividend safety — every figure a formula you can change.
Retail Real EstateThe occupancy cost of every unit in a centre, the sixteen per cent of the rent roll no tenant can sustain, and the right-size-convert-or-hold decision priced.
Sale and LeasebackA €179.5 million transaction end to end, with rent cover measured on the entity that actually signs the lease.
Self-Storage Real EstateThe cohort engine behind a 590-unit store, and the rate increase on existing customers priced against the move-outs it causes.
The Fund Finance ProfessionalChapter 8 builds the reported-to-eligible NAV bridge; chapter 9 computes every ratio without it. Two points at every state — and what a subscription line does to the IRR.
The Growth Equity InvestorWhat a pro rata cheque really costs, and the band where defending your ownership loses money.
The Private Credit InvestorThe two coverage ratios are not measured on the same thing: the erosion is 47.7 per cent, not the 28.7 the headline implies.
The Private Equity Fund Controller PlaybookThe book defines IRR, DPI, RVPI and TVPI, tells you to update them at the exit, and prints not one value. Computed: a 1.833× deal inside a fund at 0.892 TVPI.
The Venture Capital AssociateWhat defending a position costs, and how many companies a reserve pool actually defends.
Financial Risk ManagementA fund inside every limit that cannot meet a redemption — and the number that decides it is the one with no currency attached.
Business ValuationThree advisers land 26.8 per cent apart on one company, and the whole gap turns out to be 1.96 points of perpetual growth.
Quantitative FinanceThree models agree to a quarter of one per cent about a number that one unobservable input moves a hundred and three times as much.
Asset ManagementFour people quote four returns for one mandate, all correct and 2.7017 points apart — forty-eight times the manager’s net skill.
Alternative InvestmentsA manager reports 13.29 per cent and the endowment earns 6.26 — both correct, and only a third of the advertised advantage arrives.
Credit AnalysisFour defensible EBITDAs on one borrower give leverage from 3.19x to 6.47x — and the add-back argument is fifty times the covenant headroom.
Machine Learning for FinanceFive people quote the accuracy of one credit model, all five are right, and the number that decides how much money it makes is none of them.
Commercial Real Estate InvestingThe equity earned 8.6647 per cent and the investor received exactly 8.0000 — the preferred return, and nothing above it.
Mergers and AcquisitionsThe board paper says the deal creates 13,436,667 of value. The arithmetic says it destroys 17,530,855. Nobody is lying.
DerivativesThe treasury report says the hedge cost 1,233,698. That is the interest differential, not a cost.
Treasury ManagementFive cash balances for one company, all correct and 145,600,000 apart — and the revolver that is two-thirds of the liquidity leaves at a revenue fall of 8.4127 per cent.
Financial Planning and AnalysisRevenue 3.0190 per cent above budget and operating profit 16.3209 per cent below it, in the same quarter, with every figure correctly stated.
Energy TradingA position report that is 91.7031 per cent hedged and correctly computed, on a book that is short 2,542,000 MWh — and a margin call of 198,400,000 the next morning.
Construction Cost ControlA contract sum of 26,301,102 became a final account of 29,153,363 on the building that was drawn — and 85.8 per cent of what was lost was knowable on the day it was signed.
Trade FinanceSix routes to payment on one 4,200,000 export order cost between 178,040 and 223,268, a spread worth 14.8 per cent of the margin, and a day of buyer credit costs 1,031.76.
Cost AccountingOne factory costed twice on the same 13,440,000 of overhead, and 4,053,091 moves between four product families.
Pricing StrategyA list price of 148.00, a pocket price of 112.51, and the nine deductions in between — with what one point of price is actually worth.
Contract ManagementA bid 5.50 a unit cheaper, signed on paper worth 9.81 a unit more — and 94.68 per cent of it was knowable on the day of signature.
Capital MarketsFour defensible readings of one bond, the cost of an issue under each convention, and the placement discount computed at a constant discount.
Financial RegulationThree ratios pass and the fourth is in breach by 1,956.0 million: the output floor, the liquidity buffer after encumbrance, and the loan split.
Bank ManagementFour defensible readings of one balance sheet, the deposit beta measured two ways, and the liquidity that lasts 3.9 days.
The Real Estate WorkoutFour ways out of one broken loan, discounted to today, and the 58.7 cents at which a payoff beats enforcement.
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