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if the management fee is just 2%, is it enough to pay salary to VCs for the whole year?
by ideas101 19y ago
if the management fee is just 2%, is it enough to pay salary to VCs for the whole year?
- tlrobinson 19y agoWell, 2% of $200 million = $4 million. Funds typically have a lifetime of 10 years, so they have multiple funds in the pipeline.
- skmurphy 19y agoIt's 2% per year of typically hundreds of millions of dollars: it pays for VC salaries and maintains office and staff. Their upside comes from investment profits. They take 2% of the fund per year, whether or not the fund makes money. If it doesn't they may have trouble raising an additional fund but that's a different question. Angel groups have a much different structure (e.g. Band of Angels, Angels Forum) where each individual investor contributes a set amount to a particular investment.
- kkalpesh 19y agoIt sure is! There are not more than 8-10 partners in a large fund, smaller ones ($200-400m) have no more than 3-4 partners. The most typical structure is 20/2.5 which means that 20 % of the exit pay off from a company and 2.5 % of the fund size are pocketed by the VCs. I learnt this from a talk with an Indian VC who had a prior experience of running funds in US as well. Hope it answers your query!