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.

They're great for the VCs who want to harvest management fees, but not-great for the institutions who put their cash in.

The real question is: as a society should we give 2/20 to people who spend most of their time wasting time on twitter and quoting Sapiens to each other?

So who are the shovel manufacturers in this case?

If management fees are 2/3 of the fund's income then the management is twice the performance fee. Given value of fund at start (f_0) and value of fund after a time period (f_1) then the value is:

    0.02f_1 = 2( 0.2 ( f_1 - f_0))
    f_1 = 20 (f_1 - f_0)
    20 f_0 = 19 f_1
    f_0 = 0.95 f_1
    f_1 = 1.053 f_0

So management fee is 2/3 of the income if the performance is 5.3%. SPY performance is all over the place[0] but you can see years with 10% or 20% growth.

But check my math because I'm a moron.

[0] https://finance.yahoo.com/quote/SPY/performance/

So depending on how carry is calculated that would be 4.24% or 2.24% performance per year. That is far below the average return of the market.

Just like most start-ups underperform the market.

But then you get some rocket ships.

And everyone (LP, VC) thinks they can pick the future rocket ships (VC, startup).

Maybe some of them can.

Bingo