- VCs taking public money (pensions, sovereigns, etc) must publicly disclose all deals, terms, marks and position changes.
- LPs managing public money must publicly disclose all fund positions and cash returns.
- Tax treatment for anything up to ~series A should be extremely advantageous to small managers.
- No passing public money through multiple layers (e.g. VCs acting as LPs to EMs).
- LPs managing public money should not offer bonuses to their allocators based on short-term performance.
- LPs managing public money should have something similar to polical rules around disclosing gifts, travel, hospitality, etc.
This is just a start. The highest level changes that should be made to correct some of the perverse incentives in venture capital today, providing adequate accountability for public capital.
There’s much more to talk about in terms of diverging small AUM and large AUM managers, or standards for valuation and reporting marks, but that starts to get deeper into the weeds.
First, we need to be concerned with how pension money is being invested and the long-term implications that has on the startup funding and innovation.
Giant pools of capital being awarded and invested in an unmeritocratic manner have a toxic influence on the venture market.
Originally posted in response to a question by Brandon Brooks, here.