This episode is part of a three-part series taking listeners behind the curtain to discuss the inner workings of venture capital. Parker Thompson (@pt), partner at AngelList, and Ash Fontana (@ashfontana), general partner at Zetta Ventures, join Erik on this episode. They start off by discussing why topics around VC and portfolio construction in particular are so controversial. Parker and Ash give a rundown of how they invest with their respective funds and what their theses are when it comes to venture investing. They address the perennial debate of how much money to allot to initial round investing versus reserves for follow-on investing. It gets pointed out that based on the data, new funds are as likely as existing funds to succeed, and they talk about whether there’s a universal answer to the question of how much money under management a VC would ideally like to have. The three of them talk about the possibility of scaling up a fund with operating partners and discuss research that shows that the more companies invested in, the better the returns. That trend continues to hold, in theory, no matter how big the fund gets. However, Parker brings up the "math versus reality dichotomy," and they talk about why in practice scaling up infinitely doesn’t work. Erik asks both of them how they would set up their fund if they had no constraints, and they talk about why "fund size is destiny" in venture. Ash and Parker explain why even though venture firms say that the founder is their customer, really the LPs are the actual customers. They also talk about why innovation is needed on the standard “2 and 20” model (2% management fees and 20% carry), discuss potential replacement models, and explain why Y Combinator has the best business model in venture, even though there are some pitfalls for entrepreneurs. Thanks for listening — if you like what you hear, please review us on your favorite podcast platform. Check us out on the web at villageglobal.vc or get in touch with us on Twitter @villageglobal. Venture Stories is brought to you by Village Global, is hosted by co-founder and partner, Erik Torenberg and is produced by Brett Bolkowy.