In this week’s episode of StrictlyVC Download Podcast, veteran VC Aileen Lee was direct about the recent boom and key consequences of the bust cycle. They also lost the champion who once supported them.
Lee is debating how limited partners are reluctant to criticise strong fund managers and fears they will be locked out of their investments in those companies once again. But she imagined they would say whether they could speak freely:
“Everyone wants to join the X-brand name fund, so they never criticise them (fearing the impact). They probably talk about us behind our backs lol. But what they say is all the people who were (before) hired by these venture companies in the ZIRP era. They made a lot of cheap investments,” and now they are stretched their elbows except it’s too late, Lee observed. “All (LPS’) money was basically dumped into the drain because the people at Venture Jobs didn’t stick long enough to see if the companies were successful.”
It’s not the fault of these new investors, Lee continued. “A lot of investment was made, with only a ton of people being given check books that were not trained and could not receive mentorship or apprenticeship. As a result, there are many orphan companies.
But there is another reason why startups are left to their devices. In many cases, companies are orphaned to their more senior general partner, “Leading an investment – still in the company but stopped competing on the board.”
For certain companies, it has been happening at this point for years. During the Go-Go symbiosis of fundraising, no one did that much due diligence. Also, corner cuts never stopped when it came to these same investments. But that is also an important reason why more and more companies struggle to find help outside their exit strategies, and why is LPS justified by voicing more frustration?
Another longtime VC, Jason Lemkin, told the editor in late 2022 when he first appeared on the board of startups where VCS had lost momentum, “Is there no check and balance? If millions are invested in pension funds, universities, widows and orphans and don’t work hard along the way, do you have to be ongoing hard work on the board and invalidate some of the fiduciary responsibility for LPS?”
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