If you squint at “generational change” in venture, you can see it is fairly common that the super successful VCs transition out well before retirement age:

  • John Doerr semi-retired at the peak of his game, the best investor ever or at least of his time, only coming out to try to right the ship.
  • Matt Cohler (super rich already from Facebook) and other partners moved on from Benchmark, one of the best funds of all time: Benchmark raising ninth fund, Cohler and Lasky step back
  • Jim Breyer, for whatever reasons, moved on from Accel to manage his own money.
  • Joe Lacob left Kleiner Perkins to buy and run the Warriors.
  • Chamath from Social Capital, already ultra wealthy, decided managing a traditional venture fund just wasn’t worth the relatively modest returns.

There are a number of reasons for this. The game doesn’t get easier in some ways — venture is very competitive. After an amazing / epic fund, it can be hard to see yourself doing the same again. And funds last 10–13 years!

Crazy math: Assume a $250m fund that does 15x net (after fees). Like Benchmark’s last fund. That’s once in a generation or so though — it’s very rare. But it does happen. Benchmark Capital Stays Lean, Even After $14 Billion Bonanza. That’s maybe $3.5b in total gains. 20%-25% of that might go to the partners, let’s assume $800m total to the partners, across 4 partners. That’s $200m each. Incredible! Not as rich as many of your CEOs — interesting and important to note — but that’s serious, generational money.

Now: say you do 15x in the current fund, but the next fund struggles to do 2x, and it doesn’t feel “easier”. That’s not that uncommon. Yes 2x is $250m in gains on a $250m fund, and with say 20% to the partners ($50m to partners), divided by 4 partners, that $15m each. But that’s usually over 10 years, or $1.5m a year. A lot, but nothing like the prior fund. If the partners made $200m each already, and now are working every day, managing their own investors (LPs), dealing with CEO headaches, and more … to make $1.5m a year when they already made $200m. Doesn’t really make sense …

A mediocre VC, by contrast, likely has many incentives to hang on as long as possible.

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