I recently had a meeting with a well-known Israeli startup investor. The talk somehow pivoted from my seed-seeking startup into talking about the macro view of venture capital and how it doesn’t actually make sense.
“Ninety-five percent of VCs aren’t profitable,” he said. It took me a while to understand what this really means.
I’ll clarify: Ninety-five percent of VCs aren’t actually returning enough money to justify the risk, fees and illiquidity their investors (LPs) are taking on by investing in their funds.
Who’s actually succeeding in making money?
A VC fund needs a 3x return to achieve a “venture rate of return” and be considered a good…