Whaling Power Law, LP Incentives & VC 2 & 20 - E522

BRAVE Southeast Asia Tech: Singapore, Indonesia, Vietnam, Philippines, Thailand & Malaysia Startups, Founders & Venture Capital VC (English)

Jeremy Au explored the nuances of venture capital through three lenses. He described how LPs, such as sovereign wealth funds and institutional investors, pursue diversification and long-term returns, often seeking a 25% net IRR to justify the high risks of VC, as seen in Southeast Asia's emerging tech ecosystem. Using the "2 and 20" model, Jeremy explained that a. general partners commit 1% of the fund size (e.g., $1M for a $100M fund) as skin in the game while limited partners provide 99% of the capital. b. GPs spend 2% of the fund size on operations for 10 years and c. GPs receive 20% of the fund exit upside and LPs 80%. He shared examples like Sequoia's $100M investment in Zoom, yielding 22x returns, and Facebook's acquisition of WhatsApp, which turned a $60M investment into $3B. Lastly, he likened VC to 19th-century whaling, where only 6% of deals produce 60% of returns, drawing parallels to how power-law distributions shape the industry’s focus on rare, high-value investments.

Watch, listen or read the full insight at https://www.bravesea.com/blog/vc-vs-whaling-power-law

Get transcripts, startup resources & community discussions at www.bravesea.com

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English: Spotify | YouTube | Apple Podcasts

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Chinese: Spotify | YouTube | Apple Podcasts

Vietnamese: Spotify | YouTube | Apple Podcasts