Sequoia Capital's Roloff Botha calculates that with ~$250 billion invested into venture capital annually, the industry needs to generate nearly $1 trillion in returns for investors. This translates to a staggering $1.5 trillion in total company exit value every year, a figure that is difficult to imagine materializing consistently.

A counterargument to bearish VC math posits that the majority of the $250B annual deployment is late-stage private equity, not true early-stage venture. The actual venture segment (~$25B/year) only needs ~$150B in exits, a goal achievable with just one 'centicorn' (like OpenAI) and a handful of decacorn outcomes annually.

The standard VC heuristic—that each investment must potentially return the entire fund—is strained by hyper-valuations. For a company raising at ~$200M, a typical fund needs a 60x return, meaning a $12 billion exit is the minimum for the investment to be a success, not a grand slam.

Aggregate venture capital investment figures are misleading. The market is becoming bimodal: a handful of elite AI companies absorb a disproportionate share of capital, while the vast majority of other startups, including 900+ unicorns, face a tougher fundraising and exit environment.

Venture capitalists may value a solid $15M revenue company at zero. Their model is not built on backing good businesses, but on funding 'upside options'—companies with the potential for explosive, outlier growth, even if they are currently unprofitable.

Botha argues venture capital isn't a scalable asset class. Despite massive capital inflows (~$250B/year), the number of significant ($1B+) exits hasn't increased from ~20 per year. The math for industry-wide returns doesn't work, making it a "return-free risk" for many LPs.

The venture capital return model has shifted so dramatically that even some multi-billion-dollar exits are insufficient. This forces VCs to screen for 'immortal' founders capable of building $10B+ companies from inception, making traditionally solid businesses run by 'mortal founders' increasingly uninvestable by top funds.

To generate returns on a $10B acquisition, a PE firm needs a $25B exit, which often means an IPO. They must underwrite this IPO at a discount to public comps, despite having paid a 30% premium to acquire the company, creating a significant initial value gap to overcome from day one.

The majority of venture capital funds fail to return capital, with a 60% loss-making base rate. This highlights that VC is a power-law-driven asset class. The key to success is not picking consistently good funds, but ensuring access to the tiny fraction of funds that generate extraordinary, outlier returns.