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 " 'Back to the future' is the answer to most of the venture capital asset class problems," posits Union Square Ventures co-founder Fred Wilson in a blog post Wednesday. "Less capital in the asset class, smaller fund sizes, smaller partnerships, smaller deals, and smaller exits. The math works as long as you don't put too many zeros on the end of the numbers you are working with."Wilson (pictured) is actively soliciting -- and receiving -- input from followers of his A VC blog to solve what he calls the "Venture Capital Math Problem." "The math problem is to figure out how much in proceeds every year need to be generated to deliver a reasonable return to the investors," says Wilson. The provocative post is taking on a life of its own, with Wilson writing a follow-up post Thursday and the pair of posts generating hundreds of comments. (That's good news not only for Wilson but also for Big Head Labs, which makes the Disqus comment management service he uses and which is backed by Union Square.) One of the most intriguing comments is the first one, from Azeem Azhar, a U.K. entrepreneur and investor who is currently developing a financial analysis service. Azhar writes: "Very bright, persuasive people get into VC because it is a fantastic business. Even if you don't enjoy the notion of working with tech firms or brilliant entrepreneurs, as an asset management business a two per cent management fee makes for a decent lifestyle even with zero return. Needless to say lots of smart bright people are drawn to it, creating lots of smart, persuasive PPMs floating around the pension fund world and lots of funds drawn in." The remedy, says Azhar, is "successful funds to reduce their management fees and perhaps increase the allocation of success fees. That way LPs would see the signal of low management fees as successful funds, thereby eschewing funds charging higher management fees. VC would become relatively less attractive to GPs, reducing the number of funds and hence the over investment in the class." This certainly seems to be the week for people to offer their favorite remedies to what's ailing the VC industry. The week began with a report showing that the all-but-closed IPO market is having an ill effect on VC returns. On Wednesday, the National Venture Capital Association, or NVCA, at its annual meeting in Boston outlined its plan to reinvigorate exits for venture-backed firms. The NVCA is asking VCs, investment banks, accounting firms, law firms, stock exchanges and the federal government to consider a variety of steps, including new ways to link buyers and sellers of private company stock, using a wider variety of investment banks and accounting firms, and pushing for tax policies that could boost VC investment. (Pipeline subscribers can learn more about the NVCA's recommendations here.) - Mary Kathleen Flynn
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