There was a day when venture capital investing really mattered. In the 1990s and much of the 2000s, venture capital was acknowledged as a bright spot in the tech industry and economy; VC investments accounted for an "astonishing" 1.1 percent of U.S. GDP, according to a commentary in Business Week. 

The top dogs in the industry were seen as captains of capitalism for the longest time, but now people wonder if VC investing is relevant at all. Critical inchoate industries are "crying out" for funds, but the industry is not delivering. The commentary suggests that the standard 2 and 20 private equity fee model is not working. The problem is that the fee structure promotes early exits, effectively "flipping," while ignoring long-term opportunities.

The remedy? "Institutional VC investors should insist that management fees be tied to a budget--office rentals, salaries--not a fund's size. They should also demand a guaranteed percentage on their money, paid out before the VC manager enjoys that 20 percent share of profits. Both moves might cause VCs to hold on to their best enterprises longer." 

For more:
- here's the commentary

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