# kaal:claim:3962614-019

**Claim.** The typical VC fee based compensation structure can lead to serious shortcomings, including excessive fundraising, suboptimal investments, misevaluation, and overfunding of portfolio companies during a fund's holding period.

**Type.** failure  **Support.** argued

**Holds when.**

- fee based VC compensation arrangements

**Source quote.**

> The typical VC fee-based compensation structure can lead to serious shortcomings, including excessive fundraising, suboptimal investments, misevaluation, and overfunding of the portfolio companies during a fund's holding period.

**From.** Wulf A. Kaal, *REPUTATION AS CAPITAL – How Decentralized Autonomous Organizations Address Shortcomings in the Ventu* (2021), III. Alternative Early Round Funding Mechanisms, page 12

**Cite as.** Wulf A. Kaal, REPUTATION AS CAPITAL – How Decentralized Autonomous Organizations Address Shortcomings in the Ventu (2021). SSRN: https://ssrn.com/abstract=3962614

**Verify.** sha256 of source PDF `c6e202e77fd08db801f932774026458b94e5d103abf30cb1189fe6a1c5edf391` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20-%202021%20-%20REPUTATION%20AS%20CAPITAL%20%E2%80%93%20How%20Decentralized%20Autonomous%20Organizations%20Address%20Shortcomings%20in%20the%20Ventu.pdf

**Failure mode.** Fee driven incentive distortion  (family: agency-cost-and-managerial-opportunism)

**Topics.** ai-and-agents, risk-and-incentives, innovation

**Keywords.** compensation-structure, incentive-misalignment, overfunding, venture-capital

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