Venture Capital The 2% vs. 20% Venture Fund Dilemma: Impacts on Founders and the Future of VC
Sep 8, 2025
Hosts dive into the intriguing dynamics of modern venture capital, highlighting the battle between 2% management-fee mega-funds and 20% carry-focused smaller firms. They unpack how this divide shapes founder experience and investment strategies. The hosts discuss the evolving liquidity landscape, the influence of institutional capital, and the implications of staying private longer. Plus, they explore the trade-offs founders face when choosing between big-name VCs and scrappier alternatives, and how AI is accelerating exit strategies in the venture world.
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Scale Changes VC Incentives
- Big funds collect enormous management fees simply by scale, changing their incentives.
- That creates a split between large '2% funds' and smaller '20% funds' chasing outsized returns.
Private Markets Capture More Alpha
- Private markets now capture much more of total value creation because companies stay private longer.
- That drives more institutional capital into venture and makes private allocation essential for large LPs.
Funds Are Selling Scale To LPs
- Large institutional LPs need vehicles that can deploy very large checks into private markets.
- Funds increasingly market themselves as asset managers who can absorb $100–$200M commitments.