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> If startup employees truly believe in their company they would also take no salary at all and just live on ramen noodles. Not if you have no capital -- You

> If startup employees truly believe in their company they would also take no salary at all and just live on ramen noodles. Not if you have no capital -- You still have to eat and be housed and that costs a lot if you don't have family wealth or other income streams, even with a good salary. People also naturally have different levels of risk aversion. Not everyone can/should be putting it all on red every day. > This really makes me question which VC firm you work at as you don't seem to understand how they work. If VC firms had no alpha then they wouldn't be able to raise a second fund at all. And you'd never see VC funds stick around. You're looking at it at the 'fund' level not the individual businesses that make up the fund. To use the roulette example, if I bet specific numbers or splits, I will expect any one of those to certainly lose, but I just need one to hit to cover the rest. Since the individual bets here are human beings and companies and not chips on a table, there's definitely an element of what the top commenter said IMO.

n2d4 2y ago
> Not if you have no capital -- You still have to eat and be housed and that costs a lot if you don't have family wealth or other income streams, even with a good salary. That's exactly their point; this exact same logic can be applied to VCs, too.
- pwillia7 2y ago
  Do you mean to the employees of VCs? LPs do have capital, that's why they're LPs. For the employees, the sentiment that you should bet on the sales pitch "I won't get you fired" over "I will make you wealthy beyond measure" still holds.
  - n2d4 2y ago
    The LPs pay 2% management fee so the employees make some money regardless of the outcome, just like startup founders want to make some money even if the startup fails.
- sqeaky 2y ago
  If startups had capital to coast on they wouldn't needs VCs. If VCs didn't have capital to invest they wouldn't be VCs. One of these groups clearly has more money at the start of this arrangement and you seem to be ignoring the change in npower dynamic that creates.
  - n2d4 2y ago
    There are VCs, and there are LPs. VCs do the work of finding investments and setting up funds; LPs provide the money and wait for it to grow. Of course, from a startup perspective, both really just look like VCs. But in reality, the people working at VCs but who are not LPs are not usually rich.

n2d4 2y ago

> Not if you have no capital -- You still have to eat and be housed and that costs a lot if you don't have family wealth or other income streams, even with a good salary. That's exactly their point; this exact same logic can be applied to VCs, too.

pwillia7 2y ago
Do you mean to the employees of VCs? LPs do have capital, that's why they're LPs. For the employees, the sentiment that you should bet on the sales pitch "I won't get you fired" over "I will make you wealthy beyond measure" still holds.
- n2d4 2y ago
  The LPs pay 2% management fee so the employees make some money regardless of the outcome, just like startup founders want to make some money even if the startup fails.
sqeaky 2y ago
If startups had capital to coast on they wouldn't needs VCs. If VCs didn't have capital to invest they wouldn't be VCs. One of these groups clearly has more money at the start of this arrangement and you seem to be ignoring the change in npower dynamic that creates.
- n2d4 2y ago
  There are VCs, and there are LPs. VCs do the work of finding investments and setting up funds; LPs provide the money and wait for it to grow. Of course, from a startup perspective, both really just look like VCs. But in reality, the people working at VCs but who are not LPs are not usually rich.