"When you're investing in a power law, think of it this way: it's like managing Manchester United, Chelsea, or Arsenal. Or better yet, like preparing for the Olympics. You're the swim coach, scouting for talent that can win gold. At the Olympics, there's gold, silver, and bronze—everything else earns nothing. Most people are average swimmers; some are above average, and others are good. But as a coach, you focus on the ten swimmers who truly have a shot at gold. That’s how portfolios are built—selecting only the best to represent their potential, just as countries carefully choose athletes for gymnastics or track and field to maximize their chances of success.” - Jeremy Au, Host of BRAVE Southeast Asia Tech Podcast" - Jeremy Au
"If your fund size is too small, you can’t support the general partner, the team, or even the legal requirements. There’s a certain threshold that people need to meet. For instance, Silicon Valley Bank used to bankroll GP commits. They’d step in and say, “We’re happy to put up that half a million dollars, or even a million, so you can keep sending your kids to school or paying your mortgage.” They offered financing for that. Another example was mortgages. A lot of founders and VCs have their wealth tied up in stock, which you can’t use to secure a mortgage. Silicon Valley Bank was one of the few willing to lend against your paper stock and shares to make it happen.” - Jeremy Au, Host of BRAVE Southeast Asia Tech Podcast" - Jeremy Au
"The term "general partners" is critical because, while many are called partners, general partners are the ones truly in charge. They receive the capital and commit to investing it in startups. Limited partners, on the other hand, are named so because their legal liability is limited. If something goes wrong—be it fiduciary issues or negligence—limited partners are not held legally responsible. However, general partners have unlimited legal liability for such mistakes." - Jeremy Au
"General partners also have skin in the game. For example, in a $100 million fund, a GP typically invests 1%, which means putting in $1 million of their own money—this is called a GP commit. From the $100 million, 2% of the fund is allocated annually for expenses, providing $2 million per year over the next decade to cover operational costs. If the fund grows to $1 billion—achieving a $900 million gain—20% of that upside, or $180 million, goes to the general partners as their share of the profits.” - Jeremy Au, Host of BRAVE Southeast Asia Tech Podcast" - Jeremy Au
In this episode, Jeremy Au speaks on the whaling power law, LP incentives, and VC 2 and 20 fund economics.
Keywords: Whaling Power Law, LP Incentives, VC 2 and 20, Fund Economics, Singapore, Southeast Asia, VC, Angel Investor, Thought Leadership
