A Unified Theory of VC Suckage

Paul Graham’s essay A Unified Theory of VC Suckage argues that VCs’ problematic behavior stems from structural incentives, not personal flaws.

The Core Problem

VCs receive compensation as “a percentage of the money they manage: about 2% a year in management fees, plus a percentage of the gains.”

This creates pressure to manage enormous funds, forcing each partner to oversee massive individual investments. “Each deal has to be for multiple millions of dollars” because one person can only handle so many transactions.

Resulting Dysfunctional Behaviors

Paranoia and Due Diligence: Large sums necessitate exhaustive vetting that founders experience as intrusive.

Idea Theft: VCs share confidential information with competitors, treating deception as a business tactic.

Micromanagement: They install their own CEOs and board representatives to maintain control.

Oversized Investments: Companies receive more capital than needed, leading to bloated operations.

Inflated Valuations: High valuations lock founders into pursuing unlikely exits.

The Implication

VCs aren’t inherently jerks—their environment transforms them. Top-tier funds avoid these behaviors because they can afford selectivity.

What’s your experience with VCs? I’d love to hear at persdre@gmail.com.