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At Kleiner we know from the Pao case that junior partners make $400k while senior partners make $3 million. That's before carry. Carry is about 20% of the retur
by foobarqux 11y ago
At Kleiner we know from the Pao case that junior partners make $400k while senior partners make $3 million. That's before carry. Carry is about 20% of the returns of the fund, which is divided between (senior) partners of the particular fund --- a VC firm has multiple funds and depending on the firm not every partner may be a partner in each fund.
I guess you could ball park 5 partners per fund and therefore 4% carry per partner but that's probably not accurate because the carry distribution likely rewards partners in proportion to the success of the companies that they sourced or on whose boards they sit. Also you want to give a little bit to associates and junior partners.
Carry is not guaranteed but if the returns are positive you will get something (and 20% of a middling 5% return is still a lot of money on a billion dollar fund.) In any case carry is valuable in VC because they are like free call options on very volatile assets and option value increases with volatility.
It's difficult to calculate how much VCs are getting from carry because fund returns are closely guarded secrets.
All this said it's pretty tough to break-in to top VC firms.
- sparkzilla 11y agoDoes the fund only makes returns on liquidity events?
- foobarqux 11y agoI believe carry is only paid when capital is returned to investors (anything else doesn't make sense). Besides a (portfolio company) liquidity event I think the only other typical time capital is returned is possibly at the maturation of the fund. I guess in theory you might have a portfolio company paying dividends or other unusual situations, I don't know how those are handled.
- cdibona 11y agoSometimes there are cash distributions before the fund closes. I've seen these after big exits, but they usually come later in the fund.
- foobarqux 11y agoMaybe I wasn't clear: Cash is returned on liquidity events, potentially at maturity (but maybe the fund rolls over positions or delivers stock) and maybe some other rare cases.
- e12e 11y agoHow can fund returns be highly guarded secrets? At least the IRS must have some statistics? I suppose the firms themselves aren't traded, and so don't have to disclose information to anyone other than their customers.
- robk 11y agoKleiner is a huge fund though. Most smaller funds have partners that make a lot less. If you're an engineer, you're making more than I am as a newish VC :)
- Enzolangellotti 11y agoYeah, I assume newish VCs have it tougher than most as expenses are high and management fees won't cover the full costs of operating the business. Well, you're entrepreneurs working at a higher level of abstraction after all.