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What a mess of perverse incentives. I can understand how the best VCs can get away with insisting on such terms from their LPs, but how are the rest of the VCs
by donaldc 16y ago
What a mess of perverse incentives. I can understand how the best VCs can get away with insisting on such terms from their LPs, but how are the rest of the VCs able to get away with it?
- danshapiro 16y agoActually the best VCs get even better terms - e.g. 3-30. But I've heard VCs say that anyone who comes out with sub-market terms in their fund has a positioning problem: the best returns come from a tiny number of firms, and the returns dwarf the management fees, so LPs are entirely concerned with quality and only minimally with cost.
- donaldc 16y agoWere I a limited partner, I can't imagine giving such terms to any VCs lacking a stellar track record. I understand why the rest of the VCs would want to position themselves thusly, I just don't understand how they can actually find LPs willing to go along with it.
- danshapiro 16y agoA lot of them can't, and we'll see the fallout from that over the next several years!