My thesis isn’t so much that VC is cured, but that for the first time in a long time, deals are working, IPOs are happening and M&A is happening at high levels. This means that certain funds with certain strategies are working, and LPs are seeing distributions for the first time in 5-10 years. This is not only a notable change, but significant for confidence in the model, which is spurring new deal activity this quarter.

The business is far too big, and strategies far too undisciplined. Smart LPs are chasing the pockets of the business where returns can be had, but to your point, there aren’t $30 billion worth of these pockets.

Venture is, and always has been, a great small business.

a bunch of portfolio companies with $100MM revenues? cool!

but the IPO market is a faint shadow of itself. the indystry needs 100-200 successful IPOs per year to make LPs receive above market returns

ditto M&A — the problem isn’t that there is an appetite for acquisitions. the problem is that portfolio companies exit valuations can’t possibly be high enough to generate sufficient returns

ina hutsheel, if the VC industry is investing $30 billion per year then it needs to be harvesting $90 billion per year to create venture returns (that is, to beat plain vanilla liquid investments by a margin sufficiently large to justify huge fees, illiquidity and long long time frames)

and that’s ain’t happening. no way no how

the VC industry needs to shrink by at least 50% before LPs can see success. and also VCs need to reduce management fees.

ping me when hell freezes over