Venture LPs blowing in the wind

Chris Douvos, Co-Head, Private Equity, at The Investment Fund for Foundations appears to have been stung by the NVCA bug of miserable VC excuses. Which always makes me wonder, why do LPs continue to play nice with VCs and want to save GPs who do not perform? As if the breed of underperforming GPs is worth saving?

According to Cesar Milan, we should blame the owner for the dog’s behavior, and thus we should undoubtedly assign blame to LPs for the underperformance of GPs. Not in the least because the economic model under which Venture is deployed is economically flawed.

In his announcement email as the co-chair of the 22nd Annual Venture Capital Investing Conference, June 7-9, 2011 at the Sofitel Hotel in Redwood City Chris writes to wait for a new crop of VCs to emerge and refers to winds of change in Venture and conveniently referring to miserable last 10 years in Venture as a down-cycle. Of course, the proverbial down cycles are a great way to diffuse any argument against underperformance. Just wait until your child comes home with miserable grades from Harvard and merely referring to them as a 10-year down cycle.

But the most benighted part of Chris e-mail is how he defers all performance issues in Venture to GPs, blissfully forgetting that LPs hire the GPs that don’t perform. And thus expecting change in Venture without a seminal event to induce such change is foolery.

A broken system rarely gets fixed by those who created and still benefit from it (by skimming management fees), and Chris’ suggestion of synthesizing the old with the new may be wishful and self-serving thinking, but hardly realistic. Chris’ words demonstrate he certainly has been drinking the NVCA kool-aid. Venture Capital needs to be remodeled from the top down, economically.

But the good news is that Chris’ wishes can come true if he is more critical of the role of LPs in the sub-priming of Venture Capital over the last twenty years. Only a rigorous financial reform can resurrect Venture.

[Links: Venture Capital Investment Conference]

P.S.: Greetings from Brittany, France.


Let’s lead the world by example with new rigors of excellence we first and successfully apply to ourselves.

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