# Precursor Fund III Financial Model - Canonical: https://finamodel.com/startups/precursor-fund-iii - Excel download: https://finamodel.com/startup-models/precursor-fund-iii.xlsx - Category: Enterprise/Security - Model type: VC Fund Waterfall - Funding round: Fund 3 - Funding: $40M - Founded: 2020 ## About the company Precursor Fund III is a venture fund rather than an operating business. The relevant question for LPs is how capital will be deployed and returned through a portfolio, not the gross margin or working capital of a product company. Fund economics are shaped by commitments, investment pacing, portfolio construction, reserves, management fees, and carried interest. The J-curve reflects capital being called and invested well before distributions from successful exits arrive. The model schedules capital calls, investments, follow-ons, fees, exits, and carry. It calculates MOIC, DPI, TVPI, RVPI, and gross and net IRR, with sensitivity cases for ownership, dilution, loss rates, exit values, and timing. ## What's included - 5-year monthly revenue build with stage-appropriate growth assumptions - Full P&L, headcount plan, and operating-expense schedule - Cash-flow statement, runway, and burn-rate tracking - Valuation via exit multiple with a DCF cross-check - Returns analysis with MOIC and IRR - Unit economics including CAC, LTV, payback, and cohort retention ## Product & value proposition - Precursor leads pre-seed rounds of $1M or less - one of the few institutional firms willing to lead and set terms at this stage. - Investment thesis: bet on founders before there is product-market-fit data; occupies the "low data on business, low familiarity with founders" quadrant that other firms avoid. - Value-add beyond capital: help founders syndicate rounds, coach on fundraising, on-demand operational support (hiring, co-founder conflict, strategy). - Community of 300+ founders across portfolio. - Deep relationships with top seed and Series A firms to facilitate follow-on financing. --- ## Market --- ## Revenue model Venture fund economics - standard LP/GP structure: - **Fund size:** $40,000,000 (Fund III). - **Fund I:** $15,300,000. **Fund II:** $31,300,000. - Reserves/follow-on: Fund III uses a "Reserves Fund only" structure (replaces SPVs used in Funds I & II) to follow on in winners. - SPV income (Funds I & II): used SPVs to syndicate follow-ons; Fund III eliminates SPVs in favor of an integrated reserves fund. --- ## Traction & metrics All numeric KPI values on the Fund I and Fund II summary dashboards (slides 11, 18) and the portfolio snapshot tables (slides 13, 20, 22, 23) are **redacted** (blacked out in source images). The following numbers ARE visible in the deck text: **Fund I**: - Fund size: $15,300,000; closed 2016 - Portfolio size: 83 companies - Initial check: $150,000 - Target ownership: 1–3% - Strategy: 20–25 companies/year; pre-seed ~65%, seed ~35% **Fund II**: - Fund size: $31,300,000 - Portfolio size: 95 companies - Initial check: $250,000 - Target ownership: 4–6% - Follow-on: $250K second investment proactively offered between initial check and next round - Strategy: pre-seed ~60%, seed ~40% **Fund III**: - Fund size: $40,000,000 - Portfolio size target: 75 companies - Initial check (pre-seed): $250,000; initial check (seed): $400,000 - Target ownership: 4–6% - Target total invested per company pre-Series A: $500K–$750K - Portfolio composition: pre-seed 75%, institutional seed 25% - Pacing: 20–25 companies/year - Follow-on: proactive capital outside of round; Reserves Fund (not SPVs) **Sector distribution (combined Funds I & II)**: - Fund I: B2B Software 30%, Consumer 23%, Marketplaces 15%, Digital Health 10%, Hardware 8%, Fintech 7%, Media 7% - Fund II: Consumer 34%, B2B Software 31%, Digital Health 10%, Marketplaces 8%, Fintech 6%, Hardware 4%, Media 4%, EdTech 2%, Consumer SaaS 1% **Co-investor network**: - YC is the most frequent seed co-investor (13 companies); Bloomberg Beta (9); Homebrew, Founders Fund, First Round (5 each) - Series A–C: YC (9 companies), a16z (4), Founders Fund (3) **Founder demographics**: - Female founders: Fund I 25%, Fund II 45% - Ethnicity: Fund I White 61%, Asian 19%, Black/AA 15%, LatinX 5%; Fund II White 55%, Asian 27%, Black/AA 12%, LatinX 3% **Deal sourcing (Funds I & II combined)**: - Other VCs 43%, Portfolio Founders 17%, Friends 15%, LPs 13%, Accelerators 3%, Non-Portfolio Founders 3%, Other 3%, Precursor Employee 3% **Standout Fund I portfolio companies**: The Athletic (Series D), Clearbanc (Series B), Incredible Health (Series A), Carrot (Series B), Juniper Square (Series C), Finix (Series B), Superhuman (Series B), AnyRoad (Series A) **Standout Fund II portfolio companies**: Runa (Series A), Modern Health (Series B), Noyo (Series A), Passport (Series A), DriveTime (Series A) --- ## Unit economics All per-investment numeric data (MOIC, DPI, TVPI, loss rates, markup multiples by stage) are redacted in the dashboard and table slides. Structural parameters visible: - Initial check size (Fund III): $250K pre-seed / $400K seed - Target total exposure per company (Fund III): $500K–$750K - Target ownership at entry (Fund III): 4–6% - Implied avg. entry valuation at ownership target: - Fund I / Fund II MOIC: redacted in images --- ## Competition / moat - Positions against top seed funds that have grown to $100M+ (Felicis, Forerunner, Lerer Hippeau, Floodgate, Uncork, Crosscut, Eniac, Freestyle) - argues those funds have migrated up-stage, creating a pre-seed vacuum. - Differentiation: willingness to lead and set terms (not just participate) at pre-seed; community of 300+ founders for support; no requirement for business metrics at entry. - Moat: co-investor network (YC, a16z, Founders Fund, First Round) validates deal quality; deal sourcing via other VCs (43%) and portfolio founders (17%) creates compounding referral flywheel. - No direct competitor named - competition framed structurally (angel / friends-and-family below, seed funds above). --- ## Team & funding ask / use of funds **Team:** - **Charles Hudson** (GP): Stanford BA Economics, Stanford MBA. Founded two companies. Prior: Google, IronPort, Gaia, Serious Business. Investor at Uncork Capital (SoftTech VC), Active Angel, In-Q Tel. - **Sydney Thomas** (Partner): Duke BA Public Policy, Berkeley-Haas MBA. Operator at Naya Health, Kimberly Clark, Soma Water. - **Ayanna Kerrison** (Partner): Baruch College BA Finance. Prior: Credit Suisse, Bank of Montreal, Merrill Lynch. - Portfolio team grid shown on slide 2 (individual names not OCR'd). **Funding ask:** - Raising $40,000,000 for Fund III from LPs. - No stated LP minimum, close date, or current close amount shown. **Use of funds (implied from strategy):** - 75 companies × ~$250K–$400K initial check = ~$19M–$30M in initial investments - Remaining ~$10M–$21M allocated to follow-on reserves fund for pro-rata / opportunistic follow-ons in winners - Management fees drawn from committed capital --- ## Recommended financial model **This is a VC fund LP pitch, not an operating startup.** The correct model is a **VC fund economics / waterfall / cash-flow model** - not a 3-statement operating model. - **Archetype + why:** VC Fund Economics model (J-curve cash flow + waterfall). Models capital deployment, portfolio construction, MOIC/DPI/TVPI over fund life, management fees, carried interest splits, and LP return distributions. Appropriate because: (a) the entity IS the fund; (b) the LP audience needs to evaluate net returns, not operating P&L. - **Forecast horizon & granularity:** - 10-year fund life (standard VC), with optional 2-year extensions - Annual granularity for deployment and portfolio markups; quarterly for cash flows - Investment period: years 1–4; harvesting period: years 5–10 - **Key drivers & assumptions:** | Driver | Value | Source | | -- | -- | -- | | Fund size | $40,000,000 | - | | Portfolio size | 75 companies | - | | Pre-seed / seed split | 75% / 25% | - | | Initial check - pre-seed | $250,000 | - | | Initial check - seed | $400,000 | - | | Target total per company pre-Series A | $500K–$750K | - | | Target entry ownership | 4–6% | - | | Pacing (companies/year) | 20–25 | - | | Management fee rate | 2% p.a. of committed capital | - | | Management fee period | 4 years (investment period) then declining | - | | Carried interest | 20% | - | | Preferred return (hurdle) | 8% | - | | Gross MOIC - winners | 20–50x | - | | Gross MOIC - portfolio avg. | 3–5x gross | - | | Write-off rate | 40–50% of portfolio by count | - | | Series A graduation rate | ~35–45% | - | | Recycling | Partial - via reserves fund | - | | Fund life | 10 years + optional 2-year extension | - | - **Scenarios (Base / Bull / Bear - which variables flex):** - **Base:** 3.5x gross MOIC, 45% write-off rate, 35% Series A graduation, 2.5x DPI - **Bull:** 5x gross MOIC (one or two breakout portfolio companies, e.g., Superhuman / Carrot-scale exits), 30% write-off rate, 2x net MOIC to LPs - **Bear:** 2x gross MOIC, 55% write-off rate, no carry generated, management fees only return - Key flex variables: gross MOIC on top 10% of portfolio, write-off rate, time-to-exit/hold period, Series A graduation rate - **Required sheets / outputs:** 1. **Inputs & Assumptions** - fund params, fee structure, deployment schedule, MOIC assumptions by cohort 2. **Deployment Schedule** - annual investments by stage (pre-seed vs. seed), check sizes, cumulative capital deployed vs. reserves 3. **Portfolio Construction** - 75-company model with stage progression (pre-seed → seed → Series A → B → exit), loss/write-off buckets 4. **Management Fee Schedule** - fee income to GP over fund life 5. **J-Curve Cash Flows** - LP contributions (calls) and distributions (dividends) by year 6. **MOIC / IRR / DPI / TVPI** - gross and net, by scenario 7. **Waterfall** - return of capital → preferred return → catch-up → carry split (LP vs. GP) 8. **Sensitivity table** - net IRR / net MOIC vs. (gross MOIC of top decile) × (write-off rate) 9. **Benchmark Comparison** - optional: compare modeled returns to Cambridge Associates pre-seed index ## Frequently asked questions ### Is the Precursor Fund III financial model free? Yes. The Precursor Fund III model is a free Excel download with live formulas. ### Can I change the assumptions? Yes. The workbook is editable and its live formulas recalculate when assumptions change.