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Comment by seem_2211 | Hacker News Reader

This is a great point - to some degree this explains the power law in VC - founders hustle hard to get in front of Sequoia / A16Z / Benchmark etc, whereas you can stumble on other VC sites and see a bunch of logos but nothing impressive.

I've been in SF for 3 years now and haven't really heard anything that impressive about Kleiner, but looking at Crunchbase, they've led the A for Rippling, the C for Plaid, the D round for Intercom, the B round for Figma, the E round for Peleton. They have a bunch of other impressive logos that they've also managed to lock in.

To your point about the web - they clearly still have it. Yes, they're out of the loop and aren't getting the early stage deal flow that they used to (to the benefit of many others), but they clearly have a deep moat still and can get an ok return from that.

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I learned from the article that KP's problem was that their firm bifurcated. They had a growth fund led by Mary Meeker which was likely responsible for a number of those impressive logos you listed.

Meeker's success with the growth fund happened as KP's early stage venture fund went into decline even though it was the original and the stalwart for decades.

The article mentioned that Meeker left last year with her entire team to start her own fund and one of KP's biggest problems has been the inability to keep its own talent. So "they clearly still have it" is likely in reference to people who have left with their 'web' and KP may not have anything.

Extremely good point

The point of the article is they’re returning 2X on their recent funds. Their competitors who got in earlier are returning 25X.

Which is great from an ego point of view, but also not that important necessarily - I think Matt Levine's point about hedge fund is largely true for VC - the point of being successful at running a hedge fund is keeping your job for a long time, rather than being exceptional.

It's a problem from an LP's POV. There is no reason to invest in a VC fund that returns 2x when you can invest in a Vanguard index fund that returns 2x. You're supposed to get compensated with higher returns for the risk you take investing in VC; if you don't, the managers of that fund are failing at their jobs.

I agree in theory but not in reality. But it's the same situation where the the incentives of an LP and a VC are different (not really that different compared to a PE or Hedge Fund). Just like the incentives of a founder and a VC are aligned, until they aren't anymore. There's a reason LPs with squillions to invest carve off a tiny smidge to VCs, and it's not just returns - it's also downside protection. What's true for you and me for our personal finance is not necessarily true for the Harvard endowment.

I thought it's because VC only had a smidge of capacity to absorb capital. You can't fit everyone's $10-$100B funds into VC projects.

Less then 1% of Facebook's value is VC funding.

That was a different era. Look at the latest crop of unicorns.

Not so much downside protection or even absolute return, but rather uncorrelated returns.

> There is no reason to invest in a VC fund that returns 2x when you can invest in a Vanguard index fund that returns 2x.

That's not how it works. LPs create a portfolio mix across asset classes and each LP has generally different mixes based on their risk profile. If you're an LP and can't get into a Sequioa/Benchmark/etc fund but still want to diversify asset classes into VC then a "2x fund" might still be attractive to be able to diversify into. There's so much to unwind here, but long story - it's not that simple at all. I agree with the OP's assertion about Matt Levine's view.

Example: https://twitter.com/ZacharyDeWitt/status/1112554272929910785

Edit: Another point worth noting - hedge funds as an asset class are notoriously not outpacing index funds (and in many cases actually losing value), yet they still get funded: https://www.nytimes.com/2018/07/12/business/hedge-funds.html

Do VC firms take 2-and-20 fees?

The used to. Not sure if that’s still true.

Yep, and the top firms take more than 2-and-20.

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