so heres how it works in short: there's LPs, those are the investors in the "fund". lets call this fund "Hacker Ventures". Hacker Ventures puts together an in

so heres how it works in short: there's LPs, those are the investors in the "fund". lets call this fund "Hacker Ventures". Hacker Ventures puts together an investment thesis, their focus,etc. and goes out to raise a fund of let's say $400 million dollars. It will be called Hacker Ventures I. The partners go raise that money from: -pension funds -universities -mutual funds -very rich individuals -possibly themselves. sometimes a fund requires partners to put in a certain amount, a small percentage. so lets say 2%, that means 8 million from each founding partner. Raising money for a venture fund is like raising money for your company in a lot of ways. They need a great team, good track record, thesis (markets+products),etc. Just because you're rich doesn't mean you can start a top tier VC firm. It's also about deal flow. The fund is then raised and investments are made. Out of the money raised 2% goes towards management fees for salary, travel,etc. The VCs really make their money off of the carry, which is their cut on an exit. So if Hacker Ventures invests 5 million at a post money valuation of 15 million in a company well call YANS, they own 33% of YANS. Let's say YANS is lucky, doesn't need another round and sells for 300 million, Hacker Ventures makes $100 million. 20% of the PROFIT is divided amongst the partners. So (100m-5m)*.2 ie- 19 million. It's nearing 3 am, so going more in depth to how a VC fund works is going to be hard. Forgive any ignorance, if what ive explained is wrong. correct me and make me learn, thats why were here :-).