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How? Via liquidation? Or scraping operational money? VCs also double down. If it blows up at the wrong time, they lose, right?
by euroclydon 15y ago
How? Via liquidation? Or scraping operational money? VCs also double down. If it blows up at the wrong time, they lose, right?
- patio11 15y agoVCs invest the money of limited partners, who are typically wealthy families or institutional investors like universities or pension funds. The compensation structure of a VC looks something like this: we make 20% of returns and 2% of the committed fund size every year as a management fee. If a VC pours $100 million into a company and, four years later, it blows up, the VC has moved about $110 million from the investor's pockets into a) $100 million into the company and b) $10 million into their own pockets. (Less their operating expenses, which are not nearly on that level. Often times their operating expenses get paid out of that $100 million, too -- e.g. VCs charging the company they invest in for the legal expenses associated with doing the investment.)