Only a small fraction of venture capital (VC) firms, around 5% , generate substantial returns. The majority struggle to meet expectations due to high risk, fees, and long investment periods. Limited partners (LPs) in VC funds seek high returns, typically 12% annually. This goal is challenging given the volatile nature of start-ups and their uncertain outcomes.VCs need at least a 3x return on investment over a 10-year period to justify their risk. Most returns are concentrated in a few successful startups, while many others fail to deliver significant returns. VCs earn management fees regardless of fund performance, providing a safety net not available to LPs or entrepreneurs. They also receive a share of profits from successful exits.

The discussion reveals the harsh realities of venture capital often overshadowed by tech glamour. Entrepreneurs seeking VC funding face high expectations and potential pitfalls, while Limited Partners (LPs) invest in a volatile asset class with uncertain returns. The disparity in outcomes—where only a few start-ups reach unicorn status —emphasizes the high-risk nature of VC investments. The industry's fee structure benefits VCs even when investments fail, contrasting with the precarious situation of LPs and founders who depend on successful exits. Understanding these dynamics is crucial for stakeholders aiming to navigate and reform the venture capital ecosystem for greater alignment and sustainability .