Re:The venture capital model is broken, and this damning rep...
by davidu on Monday May 07, 2012 @03:52PM
(#3940659)
LPs need a two-tiered investing model. It's true, outside of the very few top performers, everyone else is a loser. Unfortunately, once in a while, a loser, or more likely, a new fund hits a home run. They should have a portion allocated to investing in new funds with less capital at risk.
The 2 and 20 is also only a problem for bigger funds. For smaller funds ($40mm for instance), it's not really an issue. Assuming two partners, that's $250k annually for each, leaving 300k for office and misc expenses. Not getting "VC rich" with those kinds of dollars. It's when a 2 and 20 fund raises a 500mm or 1b fund that the 2 and 20 causes the base salary to be excessive.
The 2 and 20 is also only a problem for bigger funds. For smaller funds ($40mm for instance), it's not really an issue. Assuming two partners, that's $250k annually for each, leaving 300k for office and misc expenses. Not getting "VC rich" with those kinds of dollars. It's when a 2 and 20 fund raises a 500mm or 1b fund that the 2 and 20 causes the base salary to be excessive.