Venture Capital Unveiled: Time for Change!

When the classic VC model collides with today’s market realities: what if we dared to think Evergreen? This week, I explore fresh structures to make every dollar work harder

This week, I decided to lift the veil on Venture Capital and highlight what everyone whispers but never says out loud.

So when Ruben offered me the chance to take over The VC Corner, I knew I had to share with you what I’ve been hearing from Hong Kong to San Francisco, through Central Africa, Paris, Berlin, and London…

But before diving into the mechanics, let’s cover the basics: What is VC? How does it work? What’s the business model of these funds?

---

What is VC and the Classic 10-Year Fund Structure?

Venture Capital, or VC, is about investing in early-stage SMEs and small businesses, those aiming for explosive growth. In my vocabulary, VC is about investing in companies that aren’t profitable yet, while Private Equity (PE) focuses on already profitable businesses. Investing in an unprofitable company means accepting significant risk.

To justify an annual IRR of 20-30% for their LPs, VC funds need to push entrepreneurs to think big — very big. The VC "game" is all about having a portfolio of startups that are either worth zero or millions. In other words, it's "go big or go home."

This model is built on the classic VC fund structure: 10-year vehicles, with 6 to 7 years of investment and 3 to 4 years of divestment. A structure that pushes startups to risk everything to achieve rapid valuations.

But this model is running out of steam. General Partners are entrepreneurs themselves; the funds are young, the learning curve is steep, and the world is evolving fast. And, truthfully, this model, born in the U.S., is not universal: European, African, Indian markets — each has its unique characteristics, and they don’t always fit into this same mold. Money isn’t as liquid as in the U.S., pension funds aren’t universal, and innovation doesn’t attract the same level of enthusiasm.

So, I wanted to explore all this with you, to question, to push forward, and to think outside the box.

---

The Limitations:

For the past few months, there’s been a major standoff within European funds. Born between 2012 and 2015, these funds have raised two vehicles, deployed one, and are now trying to raise a third... (fundraising and deployment happen simultaneously) but they're hitting a wall.

Why? Because of the IRR of the fund-of-funds, those famous LPs, without whom VCs wouldn’t exist.

The performance of the first two vehicles hasn't materialized yet: exits are hard to come by, startups can’t secure refinancing, and the initial KPIs were off the mark. To put it bluntly, after 5 to 10 years, startups are still unprofitable, their valuations are too high to be acquired (especially without profitability), and their cash burn + EBITDA are not attractive enough for PE, while VC funds are too small to reinvest.

We’re stuck… Key indicators have slipped through the cracks: CAC, the CAC/LTV ratio, EBITDA… We talk about them, but we’re not managing them rigorously enough; we’re not demanding or strict enough on these essential metrics.

So, funds are adjusting: fundraising is on hold, portfolios are being reassessed, and profitability is being chased at all costs. In short, we’re finding solutions to get the machine running again.

---

And Where Do We Stand?

In the middle of a bear market, we have the chance to stand out! Where there's a crisis, there’s opportunity. Harry Stebbings just proved it with a first fund (vehicle) of… $400 million. Yes, you heard that right. Long live 20VC.

So, I’d like us to think outside the box, to dare alternatives, to see things differently. Sparking your creativity is the goal of this article.

---

Alternative Structures:

Ever since I stepped into VC with G. Ventures, there’s been one question that keeps nagging me: why 10 years? Why stick to that timeframe? I eventually figured out that this model comes from PE, where fund-of-funds are more familiar with this setup. Raising a VC fund is already complicated enough without adding further structural twists.

But here’s the thing: I don’t believe in 10-year funds. This time pressure is counterproductive. How can you deploy $150 million over 7 years and only land good deals? Either you end up flooding entrepreneurs with too much cash, which tends to turn them into jerks (it seems inherent: too much money = big ego; balance is key), or you end up backing mediocre projects. The time constraint shifts the focus solely onto investments, often at the expense of proper support.

So, it got me curious to explore alternative models. Interestingly, these seem to sidestep the exit crisis altogether. Is it because they don’t have the same time pressure? Maybe. But let’s dig a little deeper before jumping to conclusions.