“The math is officially broken now.” That post from James Sedgwick-Heath—referring to a16z’s new $20B fund and the $640B in exit value needed to 3X it—sparked a wave of interesting conversations across VCs on LinkedIn, including Peter Walker. What I’ve learned from them, and my take 👇 We’re really talking about two completely different versions of “venture capital”: ✅ One competes directly with public markets and is about the need to deploy very large amounts of capital. ✅ The other is about the opportunity to generate alpha returns and meaningfully drive innovation. Too many of us are still trying to define the entire venture landscape by a single set of rules. But the truth is, “venture capital” now spans everything from $5M pre-seed funds run by solo GPs to $20B mega-platforms that have taken a large portion of market share from public markets in recent years. The question isn’t whether $640B in exit value is realistic—it’s who that math even applies to. For LPs in a fund that size, 3X is not the expectation. They’re optimizing for: ✅ Exposure to late-stage private markets ✅ Brand association and signaling ✅ Pre- and post-IPO value capture ✅ Efficient capital deployment That structure makes sense for many institutional LPs. But it doesn’t invalidate the role of smaller, conviction-driven funds. Some LPs will still choose to allocate across a group of emerging managers—and for good reasons: ✅ Likely higher returns ✅ Ability to selectively invest much more capital into breakout winners managed by the hired GPs ✅ Preferential economics ✅ A more relationship-driven experience ✅ And the satisfaction of helping build a broader, more inclusive base of wealth These aren’t competing models. Venture isn’t broken—it’s just that VCs are playing different games, and LPs get to choose the one that aligns best with their goals.
Is it possible there's another layer to this, too: the fact that maybe an IPO isn't the endgame it once was? Seems the inevitable IPO may be an erroneous assumption. If those don't IPO, and aren't the right profile for traditional PE, what's the vehicle to invest in them? Perhaps this is an answer to that question.
I completely agree with you Austin Walters —drawing conclusions about VCs based on averages can be misleading. I really liked how you managed to turn the omelet back into eggs so simply and effectively!
Thanks for sharing, Austin. Good insights. Value transfer versus value creation for large versus small VC models
Great take! Very accurate that there are two different versions at play here
It's all about the exit.
It is also important "what" a16z is funding, especially with a history of working with Peter Thiel and Curtis Yarvin, the architects of a post-democratic world vision.
The math still works perfectly. 2% of a $20B is an amazing living for the VCs.
Some nicely added nuance!
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4moOutstanding take on this Austin! GPs need to seek out LPs who share their goals and return expectations. LPs who put $300M into a mega-fund from a16z are going be very different from those willing to put $10M into a $100M Fund II.