Brilliant post — very informative + clearly written. > What goes unsaid, is that only the actual partners in the fund get any carry, associates just get a comfortable salary and the prospects of becoming a partner (at another firm obviously) "(at another firm obviously)" — I've heard this in other discussions about VC careers too. Why is it the case?
> (at another firm obviously) I have no insider knowledge but I guess it might be due to glass ceiling s: https://en.wikipedia.org/wiki/Glass_ceiling
> I have no insider knowledge
Probably best to stop there then, as this has nothing to do with it.
So if 2/3 of the funds income is from the management fee, wouldn't that mean that the average VC fund clearly underperforms the market?
There was a Kaiser(? maybe someone else) that over a 20-30 year period, most VCs don't return capital.
Your average VC fund absolutely underperforms, and even the "good" funds sometimes just get lucky and run with that until the good will runs out. Andreessen's 2010-11 funds have underperformed the market.
So if 2/3 of the funds income is from the management fee, wouldn't that mean that the average VC fund clearly underperforms the market?
There was a Kaiser(? maybe someone else) that over a 20-30 year period, most VCs don't return capital. Your average VC fund absolutely underperforms, and even the "good" funds sometimes just get lucky and run with that until the good will runs out. Andreessen's 2010-11 funds have underperformed the market.
I find it interesting when people make a fundamental miscalculation like you did. They perform EXCEPTIONALLY well … when you start understanding who they are performing for.
Gold rush … something, something … shovels.
But I know. I know. I speak heresy on this site. I repent and beg for forgiveness for saying the kind has no clothes on.
Brilliant post — very informative + clearly written. > What goes unsaid, is that only the actual partners in the fund get any carry, associates just get a comfortable salary and the prospects of becoming a partner (at another firm obviously) "(at another firm obviously)" — I've heard this in other discussions about VC careers too. Why is it the case?
I've seen more than one associate at a VC firm become partner. And I don't know that many VCs funds intimately (about 40).
I've sometimes wondered if transitioning from CTO to VC makes sense/is possible, has anyone tried that?
Paul Graham essentially went this route, no?
YC, effectively, owns the whole stack (i.e. vertical). Their main selling point is the YC network and being founder friendly to derisk creating startups. YC also created the continuity fund that is where the typical VC comparison would be. I am not sure what the terms on it are but I imagine it is geared only to their companies. This means YC is willing to assume more risk and gives a vote of confidence for their products. It's amazing really to see this grow as big as it has in 15 years give or take.
I hate acronyms. I hate them even more when I found them in
articles with no reference about what they stand for.
Just one reference at the beginning of the text would
suffice. That should be a rule in writing articles.
Without it, it makes it more difficult to learn
something new and it makes the whole text losing
intellectual integrity.
I hate acronyms. I hate them even more when I found them in articles with no reference about what they stand for. Just one reference at the beginning of the text would suffice. That should be a rule in writing articles. Without it, it makes it more difficult to learn something new and it makes the whole text losing intellectual integrity.
Wow, what a great post. The most interesting question for me is, if you are a company with VC money and they are on your board, does the age of the vintage of the fund the money came from impact the strategy of the company down to a product level? It looks like you could literally calculate/estimate the time left in the fund and see how much pressure it will put on the CEO to get positioned for an exit, then predict…
If I understood the post correctly, fresh investments typically happen at the beginning of the fund. Only half of investable money is invested so that follow-on investments could be made when those portfolio companies go to raise again. It seems like the pressure might be on you, as a startup founder, if your vintage is underperforming and the fund is nearing the end of its expected return. Others in the vintage may…
That's the "Investment Period" quoted in the tweet. In the example it's 4-5 years, which means the fund needs to do its initial investments in 4-5 years from the fund start date. If you're in the later portion of this window, you're effectively going to get less time to build your business before the firm is pushing you to exit or looking to abdicate/write you off.
Brilliant post — very informative + clearly written. > What goes unsaid, is that only the actual partners in the fund get any carry, associates just get a comfortable salary and the prospects of becoming a partner (at another firm obviously) "(at another firm obviously)" — I've heard this in other discussions about VC careers too. Why is it the case?
Partners have two jobs at firms: raise money from LPs and convince great founders to take the firm’s money. If you were hiring a partner you would choose to go in this order: poaching a star partner from another firm, hiring a star founder/operator, an all-star associate at a more successful firm, promoting your own associate. Any of the first three options will help sell LPs and founders on your new fund by bringing…
I remember going to A16Z a few years ago, and everybody was called Partner. Looking at Connie's LinkedIn profile it looks like she too was "Partner" and then promoted to "General Partner". Does that mean the "Partner" title is kinda BS and they only really mean Partner when you are a GP?
I hate acronyms. I hate them even more when I found them in articles with no reference about what they stand for. Just one reference at the beginning of the text would suffice. That should be a rule in writing articles. Without it, it makes it more difficult to learn something new and it makes the whole text losing intellectual integrity.
You are reading a news site run by a Venture Capital company. I feel like you should know what VC means.