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> Put to simple terms: USV didn't grow fast enough and are now stuck in the middle. They cannot do enough (small) deals to leverage an average of their bets and on the other hand side, entrepreneurs are much smarter.

You're making it sound like USV is struggling or becoming extinct, but my impression is that they're actually doing incredibly well.

First, they're considered one of the best Series A firms in terms of financial returns. See: http://fortune.com/2011/06/06/venture-capital-returns-the-be...

Second, they have an amazing reputation among founders. Check out the following survey, where USV was ranked 2nd out of 64 Series A firms in terms of who people wanted in their Series A round: https://www.cbinsights.com/research-venture-capital-series-a...

Finally, I'm pretty sure I've read this in several places, but USV is not "stuck" in the middle. I'm positive that if they went to the market and tried to raise $500m, the market would oblige happily. It's more that they've found their fund size sweet spot -- their product/market fit, if you will -- and have little desire to raise a lot more money and become a larger firm. A lot of funds do this: they raise larger and larger funds for a while, then stabilize once they find a fund size that works well for them.

> You're making it sound like USV is struggling or becoming extinct, but my impression is that they're actually doing incredibly well.

No venture fund is doing "incredibly well" unless they return an IRR of at least 20-30% per annum. For a $175m fund, that means turning the initial $175m in approx. $455m. over 8 years (i.e. 3x, at 20% IRR). Frankly, almost no fund succeeds in doing that.

In the case of USV, doing it once doesn't mean they'll be able to do it again. I'm curious to see if their next fund will be able to do as well as their first. Respect if they can they keep making those kinds of returns by investing in startups though. It is incredibly hard, there are much easier ways to make money.

Here's a public doc that shows returns for a few USV funds: https://www.oregon.gov/treasury/Divisions/Investment/Documen... (search for "union square" in the PDF)

Union Square Ventures 2004 -- 67% IRR

Union Square Ventures 2008 -- 28% IRR

Union Square Ventures 2012 -- 42% IRR

('04 is particularly impressive because it was 14x fund at the time that the linked PDF was written)

The people who decide what is "incredibly well" are the institutional investment consultants, e.g. Cambridge Associates, who advise the actual investors in venture (and every other asset class) what is going on in reality.

The yardstick is not absolute. It's not even relative to numbers that consumers / the public (you?) generally see.

It's relative to all the other venture funds (typically grouped by vintage year) and relative to the other asset classes to which an investor might allocate -- modified by the historical and projected covariances among them.

To make it concrete: 20% IRR might be "incredibly well" in some vintage years (say, 2000?) but it might be "median" in some other vintage years (say, 1995?).

And (despite everyone saying they only want top quartile managers for everything, just like Lake Woebegon's children) a rational institutional investor might well look at venture in a period where it's been lagging the public markets, and decide it's quite rational and profit-maximizing to keep allocating to it, precisely because it doesn't march in lockstep with the other asset classes.

(And, agreed: there are much easier money games to play and venture is decidedly a "get rich slow" scheme.)

Well, the discussion moved to the performance of USV from a much more general POV on the rhetorics of their industry.

> First, they're considered one of the best Series A firms in terms of financial returns. See: http://fortune.com/2011/06/06/venture-capital-returns-the-be....

This one is interesting as well / much more recent: https://www.cbinsights.com/blog/union-square-ventures-exits-...

> Second, they have an amazing reputation among founders. Check out the following survey, where USV was ranked 2nd out of 64 Series A firms in terms of who people wanted in their Series A round: https://www.cbinsights.com/research-venture-capital-series-a....

To be honest, I wouldn't much count on surveys of this sorts. People always refer to what they know....

My general sentiment shouldn´t be USV in in struggle - still, I would stick to the point that Series A VCs have problem, if they are not top in class (in terms of fund size). It´s a matter of probabilities and USV can just do less of deals...

Yeah, I agree with you on the challenges of being a Series A VC. If you are in the top 5-10 funds and have a great brand then you're set -- at least for the next 5-10 years. If you're #15 or #30 then it's a struggle and you starting experiencing a lot more adverse selection.

1) I was thinking of GV's investment in Uber as an example. (Not a PE firm). But the point still stands, the Austin kid isn't going to swing $1-5m. Even if they were brilliant.

2)You missed the point about the training. The point isn't that they are trained. The point is that we know that they are trained. There might be dozens of people better than the traditional VCs at identifying the right opportunity but who are they and how do we find them?

The last half of your response makes me think I may have missed the original point. I thought the original point was that the VC skill set is being democratized because data is more freely available. My two points were meant to be reasons why that may not be the case.

This point about being in the middle between very large and small players might be right. I have to think on it, but it was not what I thought I was commenting on.

1) GV has $2bn under management, plus it is a corporate VC.

2) No, no or yes, yes - totally agree about training, it is still a USP. But as markets are much more public, it´s easy to follow the development even without being invested. Most of the data can be assumed from what´s publicly available (app store ranks, alexa ranks, disclosures of competitors, headcount etc.)

Admittedly I worked in VC myself - so certainly I look as well differently at news and have maybe a different analytical tool belt.

Interesting is your remark / question, about “how do we find them?” - will think about that part :-)

> 1) USV last found has $175m under management - their average ticket will be around $1-5m Series A and $5-15m in follow-up rounds. ($300m is what PE does...)

$300M is not what PE does. PE can do anything from $500k to $10B+. PE also take a majority stake typically...it's a different beast.

> The reason they are still getting money is the image they are upholding together with their echoing fanbase.

The reason they are getting money is because their LP's are getting a return. Most of their LP's are pension funds. They continue to put money in USV because it returns them money. It's that simple.

> How many people are at USV, 8 maybe? By all science, they have no chance to be smarter than the (much more connected) market anymore.

12 if you include EA's. A PE fund I work with has 25 employees, $3B AUM and very profitable. What's your point?

The point was, that with PE you are at a later stage of business (for startups usually pre IPO).

USV basically tries to do what MIT does with a fraction of the staff: Identify experiments worthwhile to pursue at earliest stages...judging by the quality of their "content marketing", I just doubt this ability. They are 1 generation VC with some lucky bets (prior to a market that matured) -- looking at their current portfolio, I wouldn´t be that bullish