How important is to own your individual track record in the VC world?

How important is to have full decision rights and special have attribution for your decisions under a form of track record ownership in the investment world? How important is track record in the VC world versus other asset classes?

The process is simple, we trade, invest, keep records, and get those records potentially audited by independent firms. However this premise is not that straight forward and it depends on the company that you are operating/investing for and the asset class you are working with.

While the audited successful track record is helpful, it’s only one component of capital raising, your track record says nothing about the operational risk of investing with you; nothing about your personal reputation or ability to work in a more structured environment; nothing about your ability to interact with other investors and to, in the VC world, to create and manage an ecosystem, to steer scale and lead to exit startups. You must generate confidence across many parameters in order to raise external capital, and the track record addresses only some of those parameters, and imperfectly.

VCs are often portrayed as risk takers who back bold new ideas. True, they take a lot of risk with their investors's capital. The industry’s revenue model, long investment cycle, and lack of visible performance data make VCs less accountable for their performance than most other professional investors. Why? Because the standard VC fund charges an annual fee of 2% on committed capital over the life of the fund plus a percentage of the profits when startups successfully exit - which can be linked with a threshold- , usually by being acquired or going public. These management fees insulate VC partners from poor returns because much of their compensation comes from fees. In other asset classes large part of the compensation come under a form of annual bonus over financial objectives.

Other investment professionals often face far greater performance pressure. Consider mutual fund managers or hedge fund portfolio managers, whose fund performance is reported daily, whose investors can withdraw money at any time, and who are often replaced for underperformance. VC performance is ultimately judged at the end of a fund’s 8 or 10-year life, so venture capitalists are free from the level of accountability that’s common in other investment realms. They take on even less personal risk than angel investors or crowd funders, who use their own capital. VC although brings much more than money to the table: It offers experience, operational and industry expertise, a broad network of relevant ecosystem contacts, a range of services for start-ups, and a potential strong track record of successful investing by its partners/team.

Do those ultimately own their track record?Is partner X responsible for the full investment decision from start to end? Who formulates the strategy? Who creates ecosystem and scouts the startup/investment? Who elaborates the investment memo? Who negotiates the term-sheet? Who arranges the syndication? Who leads and approves due diligence? Who advises the startup? Who drives through an exit?...all of these is only possible with a full team and an infrastructure behind, opposite to other asset classes where individual decision is fundamental and directly connected to a track record, in a VC firm the decision of investment should be created and shared by the team and the individual attribution - and consequent individual track record - are less important then in other asset classes.