Fixing the VC Model: GP Ownership

Posted on August 3, 2006

It occurred to me while writing the piece below on the current state of the IPO market that VCs could differentiate themselves by putting in more of their own money into their funds than the traditional 1%. This would lessen the desire to place money into investments solely to gain more management fees (it should be pointed out that most VCs strike it rich from making good investments and not on management fees). It would also align firms more closely with the entrepreneurs they work with. Some VC firms, like MK Capital, are already doing this (MK is the largest investor in their own fund) and it seems to be working great for them. Love to hear your thoughts on this.