$120 million fund. 2% management fee = $2.4 Million a year. $2.4 Million a year sounds like a lot initially, but when you consider local salaries and costs as

$120 million fund. 2% management fee = $2.4 Million a year. $2.4 Million a year sounds like a lot initially, but when you consider local salaries and costs associated with this. You might think that VC's make tons of money, but when you consider that the $2.4 Million has to fund their entire business, and when you look at how the costs break down, it starts to look a bit more reasonable. Here's how those costs break down: Office space on Sand Hill Road: 5000 sq ft @ $60sq ft / year = $300,000 3 exec admins @ $ $80k / year = $240,000 2 Associates @ $150k / year = $300,000 2 Analysts @ $100k / year = $200k 4 partners @ $300k / year = $1.2M Marketing / sponsoring events @ $100k / year Legal fees @ $300k / year Now, when you exclaim that a $300k salary is exorbitant, consider that most engineering managers in Silicon Valley make about that much. $300k will allow you to purchase a house in San Jose ($500k for an average house in the burbs), but it won't let you purchase anything in Palo Alto (over $1M, easy. Monthly payments are around $7k). Nurses working the night shift in Silicon Valley make around $150k a year without working tons of overtime. Firemen and policemen make about the same. An ER tech at a hospital makes about $70k. Add to that, that most partners and associates at VC firms will end up working 80 to 100 hours a week. So, partners will end up having an hourly wage of about $75 an hour, which is what PHP contractor will make in the area. A decent Rails contractor will bill about $150. So, when you break it down, the greedy blood sucking vampire VC's... really don't make as much as it's made out to be. A number of them are actually pretty nice, and great people to have a beer with. And, it's actually a pretty hard job. Full Disclosure: I haven't made a penny from VC's. I've had a couple sponsor events for Hackers & Founders, and a number of them have been really helpful in teaching me the ropes of Silicon Valley.